Discretionary rescission relief must be heard on merits; remand ordered with costs and court fee refund.

An application seeking discretionary relief to rescind a contract and allow damages provable in winding up must be heard on its merits where the contract is asserted to continue; summary relegation to ordinary proof of debt without deciding that application is impermissible. The general insolvency scheme requires creditors to prove debts before the liquidator and seek review if rejected, but does not authorise bypassing judicial consideration of a pending discretionary rescission/damages application. Matter remanded for fresh hearing and decision; costs awarded to the appellant, liquidators entitled to estate costs, and court fee on appeal refunded.

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Issues: Whether the learned Judge erred in refusing to hear the appellant's application under Section 230-A of the Indian Companies Act and in relegating the appellant to file a regular suit / ordinary proof of debt instead of determining the application; and whether the application should be remanded for hearing and decision.

Analysis: Relevant law includes Section 230-A which confers a discretion to make an order rescinding a contract and awarding damages provable in winding up, and Section 229 which applies the general law of insolvency to company winding up and prescribes proof of debts under the winding up procedure. Where a contract may already have been rescinded, Section 230-A cannot be invoked; otherwise an application under that section must be heard on its merits. The procedural scheme for insolvency ordinarily requires creditors to prove debts before the liquidator and to seek review of any rejection, but that scheme does not authorise summary relegation to ordinary proof without first hearing a Section 230-A application. The appellant's claim that the contract was continuing and that the bank's suspension of payment breached the contract engages the discretionary power in Section 230-A and therefore required judicial consideration. Costs and refund of court fee are incidental to the disposition of the appeal and the remand.

Conclusion: The appeal is allowed; the matter is remanded to the learned Judge to hear and decide the Section 230-A application according to law. The appellant is entitled to his costs; the liquidators are entitled to their costs out of the estate; and the court fee on the memorandum of appeal is to be refunded to the appellant.

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