Case: Shankarlal Aggarwal And Ors Vs. Shankarlal Poddar And Ors

1. The principal point raised for consideration in this appeal by special leave relates to the correctness and legality of an order by a Division Bench of the Calcutta High Court refusing to confirm a sale by the liquidators or the assets of a company which is being wound up. The company in question - The Luxmi Spinning and Weaving Mills Ltd. - a company incorporated under the Indian Companies Act -was carrying on business at Calcutta. On a petition of the 1st respondent -- Shankarlal Poddar - made to the High Court of Calcutta, this company was ordered to be wound up compulsorily by order dated August 22, 1955. But before this order was passed, certain matters had transpired to which it is necessary to advert. The appellants claiming that they had advanced loans to the company under two registered deeds of mortgage and alleging that there had been default on the part of the company in performing its obligations as to payment of interest etc. under the said deeds instituted a mortgage suit in the High Court of Calcutta for the usual reliefs under O. 34, Civil Procedure Code. Pending the disposal of the suit they moved the Court for the appointment of a receiver, and the second appellant and the Managing Director of the company were appointed joint receivers and they took possession of the assets of the company.2. By reason of this circumstance, when the order for winding up was passed in August. 1955 though the Official Receiver was appointed as Official Liquidator, still he was directed not to interfere with the possession of the Joint Receivers. Subsequently by a further order dated September 8, 1955, two independent persons who are respondents 2 and 3 before us were appointed as Joint Receivers in the suit and they were also directed to function as Joint Liquidators in the winding up proceedings.3. The Joint Liquidators applied for directions to the Court as regards the sale of the assets and properties of the company and the Court by an order dated December 20, 1955 directed their sale by public auction after due advertisement in the manner set out in the order and notice of this sale was directed to be given to the appellants who had by that date obtained a mortgage decree in their suit. At this stage it is necessary to mention that in the winding up proceedings the validity of the appellants claim as creditors and as secured creditors is challenged, and a claim by the State of West Bengal to arrears of certain taxes in regard to which priority is claimed is also pending adjudication by the Company Judge.4. In pursuance of the aforesaid directions of the Court dated December 20, 1955 the liquidators held certain auctions to which it is unnecessary to refer since these proved infructuous, but ultimately the appellants and others agreed to have the sale of the assets to be held free of all charges and encumbrances and to their claims to security over the properties being transferred to the sale-proceeds when paid into Court. Consequent on this agreement the Court made an order on July 10, 1956 by which the Joint Liquidators were directed to sell the properties free of all encumbrances, the sale proceeds realised being held in Court to answer the claims of the creditors according to such priorities as might be determined by the Court.5. The sale by public auction thus directed was duly advertised to be held on September 8, 1956 at 2 p.m. The conditions subject to which the properties were to be sold which were approved by the Court included, inter alia, (1) that the sale was subject to a reserve price to be determined by a valuer and surveyor which however was not to be made known to the bidders but had to be kept in a sealed cover until the bidding was over, (2) the sale was subject to confirmation by the Court, (3) that it was in the discretion of the liquidators to accept or reject any bid, (4) as far as possible the highest bid was to be accepted provided the liquidators considered that the bid was for a sufficient amount, (5) immediately on acceptance of the bid by the liquidators the bidder was required to deposit 25 per cent of the amount of the bid in cash "in default whereof the liquidators were at liberty to put up the property again for sale", (6) the purchaser was to pay the balance of purchase moneys within two weeks from the date of confirmation by the Court.6. The sale was held as advertised. There were in all 36 bids for lot No. 1 which consisted of the business and properties of the company starting with a bid for Rs.1,50,000/- from 3 bidders including the 1st appellant who himself personally bid for Rs. 3,00,000/-. Thereafter there was keen competition between one Nandlal Agarwalla and the appellant firm of Bansidhar Shankarlal and after successive bids by these two the highest bid reached was that by Nandlal Agarwalla who bid for Rs. 3,37,000/ -, the penultimate bid of the appellant-firm being Rs. 3,35,000/ -. No further bids were offered and thereupon the Joint Liquidators accepted the bid of Nandlal and he was directed to pay immediately Rs. 84,250/ - this being 25% of his bid-money. This bidder, however, stated that he had not brought the cash and then the Receivers offered to take instead a cheque from his solicitors, if he so desired, but this also the bidder declined and thereafter Nandlal Agarwalla left the place giving the impression on those there including the Joint Liquidators that he had gone to bring the money. The liquidators waited for about 20 minutes but as he did not turn up they again put up the property for sale. Before doing so, however, they - liquidators - enquired of the appellants whether they would stand by their previous bid for Rs. 3,35,000/ - in which case they were informed that theirs would be treated as the highest bid. They would not agree and thereupon the liquidators put the property to auction again and the starting bid was by the appellant-firm of Bansidhar Shankarlal who, as stated earlier, had, at the former bidding, offered Rs. 3,35,000/ - now starting the bid with Rs.1,50,000/- and after 8 more bids there were no further bids beyond Bansidhars for Rs. 2,25,000/ -. This bid was accepted by the official liquidators subject to confirmation by the Court after they ascertained by opening the sealed cover received from the valuer that this amount was not below the price for which the property could be sold. Immediately on the acceptance being intimated Bansidhar paid the amount required to be paid by the conditions of the sale.7. The liquidators took out a Masters summons on September 11, 1956 stating these facts and prayed for an order from the Company Judge that the sale be confirmed or such other directions be given as the Court may deem fit and proper. The summons was opposed by the 1st respondent and the main point urged by him was that when Nandlal Agarwallas bid was accepted by the Joint Liquidators, several others who had come to bid for the property left the auction room under the impression that sale was going through and that the subsequent sale at which the appellant was the highest bidder was not such as could be confirmed by the Court. The summons was heard by the Company Judge -- P. B. Mukharji, J. - and the learned judge passed an order acceding to the prayer of the liquidators to confirm the sale. Thereupon the 1st respondent filed an appeal against the order confirming the sale and also applied for the stay of delivery of possession of the properties of the company to the appellant. In the application for stay the appellate Court passed an order in these termsBansidhar Shankarlal giving an undertaking to this Court to purchase the property for Rs. 3,35,000/ - should the appeal be allowed and on Bansidhar Shankarlal depositing with their Solicitors Rs.16,000/ - to be held by the Solicitors free from lien and subject to further order of this Court to abide by the result of the suit challenging the mortgage in favour of Bansidhar Shankarlal, there will be no further orders in this application and Bansidhar Shankarlal will be entitled to possession of the factory and its assets on a sum of Rs. 16,000/ - being deposited with theirwere a few more directions made by the Court to which however it is unnecessary to refer.8. The appeal was allowed and the order confirming the sale was set aside and the liquidators were directed to resell the property after due advertisement. It is from this decision of the Division Bench that this appeal has been preferred by special leave.

Reasoning:
In the view we are clearly of the opinion that the order of the Court was, in the circumstances, a judicial order and not an administrative one and was therefore not inherently incapable of being brought up infind ourselves in agreement with the view here expressed. Madan Gopal Daga, ILR 55 Cal 262   : (AIR 1928 Cal 295  ) proceeds wholly on the meaning which could be attributed to the word "conditions" in the expression "subject to the conditions" occurring in S. 202 and does not take into account the context in which S. 202 was designed to operate and particularly the fact that more than one grade of Court each governed by different rules as to the nature of the decision which would enable an appeal to be preferred could be vested with jurisdiction under the Act. When by the proviso to S. 3 of the Indian Companies Act, 1913 the Indian Legislature enabled jurisdiction to be vested in District Courts so as to be constituted the "Court having jurisdiction under the Act", knowledge must be imparted to it that the District Courts and the High Courts functioned under different statutory provisions as regards rights of appeal from their orders and decisions. Besides, it would also be fair to presume that they intended to prescribe a uniform law as regards the substantive right of appeal conferred by S. 202. It could not therefore be that an identical order if passed by one class of "Court having jurisdiction under the Act" would be final, but that if passed by another Court vested with identical powers and jurisdiction would be subject to anthus 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 appeal and of hearing them, the period of limitation within which the appeal is to be presented and the forum 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. We also agree with the learned Judges of the Bombay High Court that the words "order or decision" occurring in the 1st part of S. 202 though wide, would exclude merely procedural orders or those which do not affect the rights or liabilities of parties.There was one further point made by learned Counsel that when the learned Judges allowed the appeal of the respondent they should not have directed a resale of the property by a fresh auction but should have confirmed the sale to the appellants at the price of Rs. 3,35,000/ - which was the amount of their bid at the first auction. The basis of this argument was the undertaking which they gave at the time of the disposal of the application for interim stay pending the hearing of the appeal. We have already extracted the terms of that undertaking. It is not easy to find any legal basis for this argument. It is true that in the event of the appeal being allowed the Court might have possibly with the consent of the 1st respondent before us, insisted upon the appellant taking the property for Rs. 3,35,000 /- but that surely cannot give the appellants any legal right to insist that the property be sold to them. It was a condition for the grant of the indulgence of stay and by no strength of language could that be read as implying that the appellants had a right to purchase the property. It is true that the appellants have made a grievance about this matter in the application for leave to this Court as well as in the statement of the case but that hardly improves for position.23. This matter may also be looked at from a slightly different point of view. Immediately Nandlal failed to turn up on September 8, 1956 the liquidators enquired of the appellants whether they were willing that their penultimate bid be treated as the highest bid and they be declared purchasers. This offer was refused as apparently they were satisfied that they would be able to get the property for a much less sum. Thereafter the liquidators took out a Masters summons seeking sanction of the Court for the sale to them for Rs. 2,25,000/-. The appellants supported that application. In other words, they wanted that the Court should confirm the sale to them for Rs. 2,25,000/- and that was the order which they obtained from the learned Company Judge. It was only when the appeal was filed and an application for stay was moved before the Appellate Court by the 1st respondent here that the offer which is embodied in the undertaking was made. In the circumstances it is difficult to see what justification there is for the contention that the learned Judges should, when they allowed the appeal, have confirmed the sale to them for Rs. 3,35,000/ -. We consider there is no substance in this submission.