1935 (7) TMI 19 - Commissioner - Companies Law

Court affirms jurisdiction, rejects time-barred set-off, corrects decree, grants declaratory relief, awards costs.

Alliance Bank of Simla, Ltd. (In Liquidation) Versus KS. Main Feroze Shah

The court upheld the trial court's jurisdiction to try the suit, rejected the defendants' claim for a set-off due to being time-barred, corrected the ... Winding up – Application of insolvency rules Issues Involved:1. Jurisdiction of the trial court to try the suit.2. Entitlement to a set-off by the defendants.3. Correctness of the decree for a sum including future dividends.4. Cross-objections by the plaintiff regarding the sum of Rs. 613-14-0.Issue-wise Detailed Analysis:1. Jurisdiction of the Trial Court:The defendants challenged the jurisdiction of the trial court, arguing that under Section 229 of the Companies Act, read with Section 28(2) of the Provincial Insolvency Act, the plaintiff could not institute the present suit without the leave of the Court. The court noted that jurisdiction cannot be conferred by waiver, nor can proceedings taken without jurisdiction be validated or upheld in appeal. The court examined the relevant statutes and concluded that Section 229 of the Companies Act does not import all the provisions of the Provincial Insolvency Act into company law, particularly Section 28(2). The court found that the trial court had jurisdiction to try the suit.2. Entitlement to a Set-off:The defendants claimed a set-off based on a joint and several promissory note executed by the plaintiff and others. The trial court rejected this claim, and the appellate court upheld this decision. The court noted that the set-off claimed was not legally recoverable as it was barred by limitation, and a previous suit on the basis of that promissory note had been dismissed as time-barred. The court referred to Order 8, Rule 6 of the Civil Procedure Code, which lays down the conditions for a set-off, including that it must be legally recoverable. Since the set-off claimed was not legally recoverable and the parties did not fill the same characters in respect of the suit, the court concluded that the time-barred set-off could not be granted.3. Correctness of the Decree:The defendants argued that the decree for a sum including future dividends was incorrect. The court noted that the trial court's judgment granted a declaratory decree and not an executable decree, given that the defendant company was in liquidation and all its creditors were only entitled to pro-rata distribution. The court found that the plaintiff's prayer for a simple money decree included a prayer that 'justice be done in the case of the plaintiff in some other way,' which covered the grant of a declaratory decree. The court decided to maintain the two forms of relief granted by the trial court while correcting the errors due to the erroneous decree-sheet.4. Cross-objections by the Plaintiff:The plaintiff entered cross-objections claiming Rs. 613-14-0 additional, alleging that this sum was allowed twice over to the defendants in the calculation of the trial court. Counsel for the plaintiff conceded that the claim in the cross-objections was untenable and based on a mistake but asked for the decree to be corrected to Rs. 4,297-7-0 by way of correction of errors. The court noted that the error was manifest on the face of the record and that the plaintiff's verbal claim was covered by the court-fee already put in. The court decided to grant a corrected decree, modifying the orders of the trial court and granting a declaratory decree to the plaintiff for the sum of Rs. 4,297-7-0, out of which Rs. 1,841-10-0 was immediately recoverable.Conclusion:The court modified the trial court's orders, granting a declaratory decree to the plaintiff that the sum of Rs. 4,297-7-0 is a debt due from the defendants, with Rs. 1,841-10-0 immediately recoverable. The court directed that parties pay their own costs in connection with both the appeal and cross-objections.