1964 (11) TMI 38 - HC - Companies Law

Court dismisses suit against defunct company, directors not liable, plaintiff to pay costs

The High Court ruled in favor of the defendants, dismissing the suit against the first defendant-company, which was defunct and dissolved. The court set ... Winding up - Power of registrar to strike defunct company off register Issues Involved:1. Maintainability of the suit despite the first defendant becoming defunct and in view of the Companies Act.2. Jurisdiction of the court to try the suit.3. Authorization of G.S. Alshi to receive N.G.P. notes for the plaintiff.4. Entitlement of the plaintiff to the interest claimed.5. Necessity of including Alshi, Hyderabad Bank Ltd., and Hyderabad State Bank as parties to the suit.Issue-wise Detailed Analysis:1. Maintainability of the Suit:- Defunct Company and Companies Act: The defendants argued that the first defendant-company was declared defunct by the Registrar of Joint Stock Companies on 25th December 1949, and thus, no suit could lie against it. The trial court found the suit maintainable, holding that the liabilities of the first defendant-company would persist and must be discharged against its assets.- Proviso to Section 247(5) of the Indian Companies Act: The proviso states that the liability of every director and member of the company continues and may be enforced as if the company had not been dissolved. However, the court noted that this proviso only applies to existing liabilities prior to dissolution. Since the directors were not personally liable for the plaintiff's claim before dissolution, they could not be held liable after dissolution. Consequently, the decree against the directors was set aside.2. Jurisdiction of the Court:- The defendants raised a legal plea that the court lacked jurisdiction as some defendants were not residents of Secunderabad. The trial court ruled in favor of the plaintiff, affirming its jurisdiction to try the suit.3. Authorization of G.S. Alshi:- The defendants claimed that G.S. Alshi was authorized by the plaintiff to receive the N.G.P. notes. However, the trial court found that G.S. Alshi was not authorized to receive the N.G.P. notes on behalf of the plaintiff. The High Court concurred with this finding, noting that G.S. Alshi had forged the plaintiff's signature on the endorsements.4. Entitlement to Interest:- The trial court ruled that the plaintiff was entitled to interest on the amount claimed. The High Court did not specifically address this issue in the appeal, focusing instead on the maintainability and liability aspects.5. Necessary Parties:- The defendants argued that Alshi, Hyderabad Bank Ltd., and Hyderabad State Bank were necessary parties to the suit. The trial court found them to be necessary parties. However, the High Court noted that the plaintiff had not appealed against the decree dismissing the suit against these parties, particularly the Hyderabad State Bank, which was in possession of the N.G.P. notes.Final Judgment:- The High Court allowed the appeal and dismissed the suit against defendants Nos. 1 to 10, ruling that the suit was not maintainable against the first defendant-company, which had been struck off the register and dissolved. The court also set aside the decree against the directors (defendants Nos. 2 to 7) and the sub-committee members (defendants Nos. 8 to 10), holding that they could not be held personally liable for the plaintiff's claim. The plaintiff was ordered to pay the costs of the defendants both in the High Court and the trial court.