1940 (8) TMI 30 - HC - Companies Law

Jurisdiction in Winding-Up Cases Under Indian Companies Act: High Court Clarifies Payment Orders

The High Court of Allahabad, in a judgment delivered by Justice Allsop, addressed issues concerning jurisdiction to pass payment orders in a winding-up ... Winding up – Delivery of property to liquidator, Overriding preferential payments and Avoidance of transfer, etc., after commencement of Issues:Jurisdiction of the court to pass orders for payment against parties in a winding-up case.Validation of payments under section 227(2) of the Indian Companies Act.The judgment by the High Court of Allahabad, delivered by Justice Allsop, dealt with five matters arising from the winding up of a company. The court considered applications by the official liquidators seeking orders for refunds from various parties and an application by an individual seeking payment of his salary claim. The main issues revolved around the court's jurisdiction to pass orders for payment against parties and the validation of payments under the Indian Companies Act.Regarding the jurisdiction issue, the court analyzed the relevant provisions of the Indian Companies Act. It was held that the court's power to pass decrees is not ousted unless specifically provided by law. Section 185 empowers the court to require certain parties to deliver money to the liquidator, but it does not extend to passing orders against other parties. The court cited precedents and English cases to support the view that it lacked jurisdiction to order payments from parties not covered under section 185.On the matter of validating payments, the court examined specific cases involving different parties. For instance, payments made to Messrs. Siemens Ltd. were not validated as they were considered preferential and could result in unequal treatment of creditors. The court emphasized the need to treat all creditors equally unless there are specific statutory provisions indicating otherwise. Similarly, payments to other parties, such as Messrs. Nariman & Co. and Syed Jawad Ali Shah, were not validated due to the absence of valid reasons for preferential treatment.In the case of Ram Kishen Das Khanna, who claimed unpaid salary, the court found that he was not an employee of the company but of the managing agents. Despite obtaining a decree in his favor, the court held that the decree was not binding on the liquidators, who have the authority to assess claims. The court dismissed his application for payment and upheld the decision of the official liquidators to disallow his claim. The court also rejected the liquidators' applications for refunds from various parties, citing lack of jurisdiction to order such payments.In conclusion, the court dismissed all applications related to payment orders and validated payments, emphasizing the principles of equality among creditors and the limitations of the court's jurisdiction in winding-up cases. The official liquidators were advised to seek remedies in the ordinary court for any further actions.