Section 230-A(5) rescission claims must be heard on merits in liquidation, not sent straight to a separate suit.

Section 230-A(5) of the Indian Companies Act empowers the Court to consider rescission of a contract and to fix damages on the application itself, and that relief must be examined on its merits in liquidation proceedings. Where the statutory remedy may still be available, the applicant cannot be sent at the threshold to a separate suit merely because ordinary insolvency procedure governs provable claims under Section 229. If the contract has already been rescinded, relief under Section 230-A may not lie and the claimant must pursue the ordinary winding up remedy, but that issue must first be decided on the application.

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Issues: Whether an applicant under Section 230-A(5) of the Indian Companies Act was entitled to have his application heard on the merits in liquidation proceedings, and whether he could be relegated straightaway to a regular suit or ordinary proof procedure.

Analysis: Section 230-A(5) empowers the Court to rescind a contract on the application of a person entitled to its benefit or burden as against the liquidator, and to make terms as to damages. The discretion conferred is directed to the making of an order on the application itself. Section 229 of the Indian Companies Act applies the general law of insolvency to the winding up of an insolvent company, so that the ordinary insolvency procedure governs provable claims. If the contract had already been rescinded, relief under Section 230-A would not lie and the claimant would have to pursue the ordinary winding up remedy. But that question had first to be examined on the application; the Court could not refuse to entertain it merely by directing a regular suit.

Conclusion: The applicant was entitled to have the application heard, and the order sending him to a regular suit was not sustainable.

Ratio Decidendi: An application for rescission and damages under Section 230-A(5) of the Indian Companies Act must be heard and determined on its merits in the winding up, and the applicant cannot be relegated at the threshold to a separate suit if the statutory relief is still potentially available.

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