1973 (8) TMI 107 - HC - Companies Law

Delhi High Court clarifies jurisdiction and procedure for liquidator suits

The High Court of Delhi held that it had territorial jurisdiction to try the suit, no leave of the court was required for the liquidator to institute the ... Winding up - Suits stayed on winding-up order, Powers of liquidator, Effect of petition for winding up subject to supervision Issues Involved:1. Territorial jurisdiction of the court.2. Competency of the suit as framed.3. Necessity of leave of the court before instituting the suit.4. Effective date of the suit if sanction is obtained.5. Relief.Issue-Wise Detailed Analysis:1. Territorial Jurisdiction of the Court:The primary question was whether the High Court of Delhi had the territorial jurisdiction to entertain and try the suit. The court examined the provisions of the Companies Act, particularly sections 446 and 523, which deal with winding-up proceedings and the jurisdiction of courts over such matters. Section 523 equates a petition for voluntary winding-up subject to the court's supervision to a petition for winding-up by the court for determining jurisdiction. Section 446(2) states that the court winding-up the company has jurisdiction to entertain any suit by or against the company. Since the High Court of Delhi passed the order for the continuance of the voluntary winding-up subject to its supervision, it had jurisdiction to entertain and try the present suit. The court concluded that section 20 of the Code of Civil Procedure did not apply due to the overriding effect of section 446.2. Competency of the Suit as Framed:The form of the suit was challenged as it was instituted in the name of the liquidator, V. Rajaraman, instead of the company. The court held that a company in liquidation retains its corporate powers, including the power to sue, which must be exercised through the liquidator. Therefore, the suit should be instituted in the name and on behalf of the company, not the liquidator. The court cited 'City Bank of Lahore Ltd. v. Shiv Ram Sharma' to support this settled law. The plaintiff was allowed to amend the plaint to conform with the legal requirements, subject to payment of Rs. 100 as costs.3. Necessity of Leave of the Court Before Instituting the Suit:The court examined whether leave of the appropriate court was necessary before instituting the suit. Section 526(1) of the Companies Act provides that the liquidator in a voluntary winding-up subject to the court's supervision may exercise all his powers without the sanction or intervention of the court, unless restrictions are imposed by the court. Since no such restrictions were imposed in this case, the liquidator did not require the court's sanction to institute the suit. The court dismissed the defendant's argument that section 457, which requires the court's sanction for actions by a liquidator in a winding-up by the court, applied to this case.4. Effective Date of the Suit if Sanction is Obtained:This issue was contingent upon whether the court held that leave was necessary before instituting the suit. As the court concluded that no sanction was required, this issue did not arise for decision.5. Relief:The court directed the plaintiff to amend the plaint to bring it in conformity with the law, subject to payment of Rs. 100 as costs. The amended plaint was to be filed within three weeks, with the defendant filing the written statement within three weeks thereafter. Replication, if any, was to be filed within three weeks after the written statement. The parties were directed to appear before the Deputy Registrar on November 19, 1973.Conclusion:The High Court of Delhi held that it had territorial jurisdiction to try the suit, no leave of the court was required for the liquidator to institute the suit, and the form of the suit needed to be amended to be in the name and on behalf of the company. The plaintiff was allowed to amend the plaint accordingly.