Deutsche Bank vs S.P. Kala Official Liquidator of Sea Transportation (P.) Ltd.

This is an application u/s 446 of the companies Act, 1956, by the Deusche Bank, a banking company incorporated and registered under the laws relating to companies in the Federal Republic of Germany and, inter alia, carrying on business at Nariman Point, Bombay.

It is the case of the applicant-bank that the company has borrowed from it several amounts of money which, at the present, are to the tune of Rs. 21,07.251,57. plus interest of Rs., 11,66,178,74,. The bank desires to recover the loans which were guaranteed by one Debrata Das, a resident of Bombay, and therefore, was intending to take the necessary legal proceedings against that company and the said guarantor. It happened however, that, in the meanwhile, an order winding up the company was made and Mr. S. P. Kala was appointed liquidator in his capacity of Assistant official Liquidator attached to the Goa Bench of the Bombay High Court. There fore, in view of the provisions of section 446 of the companies Act, leave of the court is ought to file the aforesaid suit against the official liquidator as well as against the guarantor on the original side of this High Court at Bombay.

The official opposes this application only partly since although he has no objection that leave to file a suit be granted, it is his case that this court should not allow the said suit to be filed on the original side of the High court at Bombay. It is the further case of the learned official liquidator that this court is competent and has jurisdiction to deal with the said suit, being a fact that contrary to what is stated in the copy of the proposed plain, the cause of action had arisen exclusively within Goa, as the company was incorporated in Goa and securities were to be certified by the Registrar of Companies in Goa. Therefore, the provisions of section 125 read with section 132 of the companies Act are attracted in this case.

Mr. Usgaokar has contended, in support of the application, thaat the suit is intended to be filed against the official liquidator and a third party, namely, the guarantor Debrata Das and, therefore leave to file the suit should be granted by this court in exercise of its power u/s 446 of the companies Act. He further urged that since the suit is to be filed also against a third party and not only against the company represented by the official liquidator. the company court has no jurisdiction to deal with it. Reliance had been placed on Gowra Subraya Setty and Sons V Yellamma Cotton Woollen and Silk Mills Co. Ltd. [1970] 40 comp cas 10 (mys) , State Bank of India Vs. Depro Foods Ltd., and South Indian Bank Ltd. Vs. Imperial Chit Funds (P.) Ltd. (In Liquidation), .

In turn, Mr, Kala, the learned assistant official liquidator, after taking me through the provisions of sections 125 and 132 of the companies Act, submitted that the cause of action in this case has totally and exclusively arisen in Goa and , therefore, by no stretch of imagination, the proposed suit can be filed at Bombay. He further submitted that sub-section (2) of section 446 of the companies Act gives ample jurisdiction to the company court to entertain any suit against a company and there is no restriction that such suits should be filed upon what is stated in Taxman''s company Law Digest, page 1448, namely, that after the winding-up, it is the company court which would entertain or dispose of any suit or proceeding and any claim made by or against a company and that if the application is made that, instead of the court deciding the matter, the same, in terms of the agreement, may be referred to arbitration, the court, in exercise of its jurisdiction would go into that question and decide on the merits of each case whether to refer or not the matter to arbitration. Mr. Kala, therefore urges that if the court can go into the matter as to whether or not a case can be referred to arbitration exercising the same power, obviously, the court can itself decide the suit.

I had already mentioned that Mr. Kala has very fairly stated that he has no objection to the granting of leave to file the suit. Otherwise also, in the circumstances of the case, this leave was to be granted because the proposed suit is not only against the company but also against a guarantor and in liquidation proceedings, obviously, the applicant may not be able to recover all the amount due to it. Section 446 of the Companies Act provides that, when a winding up order is made or the official liquidator is appointed as provisional liquidator, no suit or legal proceedings should be commenced or if pending on the date of the winding winding-up order, shall be proceeded with, against the company, Except with the leave of the court and subject to such terms as may be imposed. Sub-section (2) further lays down that the court which is winding-up the company shall, notwithstanding anything contained in any other law in force, have jurisdiction to entertain or dispose of, inter alia, any suit or proceeding by or against the company, whether such suit or proceeding has been instituted or is instituted. A careful examination of these provisions of law makes it clear that once a winding-up order is made or the official liquidator is appointed as provisional liquidator, no proceedings can continue or be instituted against the company without the permission of the court. It is further clear that jurisdiction to entertain or dispose of any suit or proceeding by or against the company is vested in the company court without any kind of restriction. The only restriction that exists under the scheme of section 446 is that the court should be satisfied that there is a case to grant leave to institute or to continue a suit by or against the company. There is nothing in the said provision of law restricting the jurisdiction of the company court to suits by or against the company alone. The expression "any suit or proceeding by or against the company" is wide enough to bring within its sweep any kind of suits. The authorities cited in support of his contentions by Mr. Usgaonkar are only supporting the submission that in case where a suit is filed against a company and a third person, ordinarily, while exercising its jurisdiction, the court will grant leave to file the suit. Nowhere in the said authorities, it has been laid down that the company court has no jurisdiction to entertain a suit which it allowed to be filed or to be continued where a company and a third party are impleaded as defendants. The argument of Mr. Kala based on the observations mentioned above in Taxman''s Company Law Digest corroborates the view that there are no fetters imposed by law on the jurisdiction vested by sub-section (2) of section 446 of the Companies Act in the company court to entertain and dispose of any suit or proceeding instituted by or against the company.

The result, therefore, is that the application is partly allowed and, accordingly, leave is granted to the applicant, Deutsche Bank, to file the proposed suit before this court. There will be no order as to costs, in the circumstances of the case.