Parmeswaran Pillai Padmanabhan Pillai vs South India Match Factory

Vithayathil, J.—Plaintiff 2 in O.S. No. 3 of 1105 on the file of the District Court of Quilon is the Revision Petitioner.

The Plaintiffs who are two in number filed a suit for money against the South India Match Factory Limited, Madras. The Company was incorporated in Madras under the Indian Companies Act and had its registered office at Madras. While the suit was pending the Company was wound up by the Madras High Court a O.P. 2 of 1933 of that Court on 16-2-1939. Ad liquidator was appointed to wind up the affairs of the company. On the application of the Plaintiff the liquidator was impleaded as additional Defendant 2 in the case on 17-2-1940. The Company had, at Thenmala in Travancore, Match Factory situated in a property about 35 acres in extent belonging to Government which was taken on Kuthakapattom by the Company. With the approval of the Madras High Court the liquidator sold this factory with the leasehold interest and the buildings and machinery to one Shamsuddin Rowther on 9-5-1940, corresponding to 27th Medom 1115. Subsequently, on the application of Plaintiff 2. The Court attached before judgment the factory with the buildings and machinery on 22-10-1940 (6th Thulam 1116).

After this attachment before judgment, the suit was dismissed but it was again restored to file and the vendee of the liquidator was invaded as Defendant 4 in the case. He resisted the suit, his main contention being that the attachment before judgment would not affect his interest in the match factory and its appurtenances. In decreeing the suit the Court held that the attachment before judgment was of no avail.

In appeal before the erstwhile Travancore High Court, it was held that the dispute relating to the attachment before judgment ought to have been enquired into as one falling under Order 21, Rule 56, CPC (Travancore) and the question was left open for consideration by the execution Court if and when it arose for decision. In other respects the decree of the Court below was confirmed.

In the meanwhile, Defendant 4 sold away his interests in the factory to the Madras Match. Works Limited. When Plaintiff 2 who under the degree is entitled to execute it, applied for Sale of the factory with its site, buildings and machinery, the company objected. The objection was treated as a claim by the Court below and was enquired into. The Court allowed the claim and dismissed Plaintiff 2''s execution petition for sale of the factory.

The revision is from that order. It was at first filed as a Civil Miscellaneous Appeal but was subsequently converted into a Revision Petition. It has to be observed at the outset that the dispute in this case being one between the decree-holder and the representative-in-interest of Defendant 4 and relating to the execution of the decree, the order of the Court below is one coming u/s 47, CPC and has got the force of a decree and is therefore appealable. But'' since the appeal would lie to this Court and since the matter has come up before a Division Bench of this Court we do not propose to dismiss the Revision Petition on the ground that it is not maintainable.

Coming to the merits of the petition the argument advanced on behalf of the Revision Petitioner is that the properties attached in this case being immovable properties situated in Travancore, the winding up order of the Madras High Court which was at that time a foreign Court, will not have the effect of vesting those properties in the liquidator appointed by that Court and that therefore the sale deed executed by the liquidator in favour of Defendant 4 is invalid. The reason given by the Court below for upholding, the sale is that since the company was incorporated in Madras and had its registered office there, the Madras High Court had jurisdiction to wind up the company and that u/s 178, Companies Act, when a company is wound up by Court, all the assets of the company, wherever they may be situated, will vest in the Court. It was therefore held that the Madras High Court had jurisdiction to authorise the liquidator to sell the properties at Thenmala. This reasoning does not appear to be well grounded.

Unlike in the case of bankruptcy, when a company is wound up the estate does not vest either in the Court or in the liquidator appointed by Court, but still remains in the company itself. Section 178, Companies Act only provides that all the properties and effects of the company shall be deemed to be in the custody of the Court from the date of the order of winding up and that the Official Liquidator shall take into his custody or under his control all the assets of, the company. In the case of bankruptcy, when a person is adjudicated insolvent, all his assets vest in the Official Receiver.

The difference between the effect of winding up and that of bankruptcy is pointed out by Sir G. Mellish L.J. in - ''In re Oriental Inland Steam Co., Ex Parte Scinde Rly. Co. (1873) 9 Ch A 557 at p. 560 (A). His Lordship observes thus:

Winding up differs from bankruptcy in this respect, that in bankruptcy the whole estate, both legal and beneficial is taken out of the bankrupt, and is vested in his trustees or assignees, whereas in a winding up the legal estate still remains in the company.

This is what Lord Davy says in - ''New Zealand Loan and Mercantile Agency Co. v. Morrissey AIR 1898 AC 349 (B):

There is a material distinction between, the effect of bankruptcy and that of winding In the former case the whole property of the bankrupt is taken out of him, whilst in the latter case the property remains vested in title and in fact in the company, subject only to its being administered for the purposes of the winding up.

In - ''Employer''s Liability Assurance Corporation v. Sedqwick Collins and Co. (1927) AC 95 (C) Viscount Cave observes thus:

A company in liquidation, though the administration of its affairs has passed to the liquidator, retains its complete existence." Therefore the view of the Court below that the properties of the company vested in the Court or in the liquidator on the winding up of the company, is not correct.

It is argued for the revision Petitioner that applying the principle relating to vesting in bankruptcy immovable properties situated in a foreign country will not vest in the Official Liquidator on the winding up of a company and that since the properties attached in this case are immovable properties situated in Travancore they did not vest in the Official Liquidator when the company was wound up by the Madras High Court.

It is true that under private international law an adjudication order will not have the effect of vesting in the Official Receiver immovable properties in a foreign country belonging to the insolvent (Vide - ''Official Receiver Anjikaimal District Court v. Gopala Shenoi'' 29 Trav LJ 990 (D) and - ''Parameswara Panicker v. Venkitachalam Pillai'' 32 Trav LJ 8 (E)). But in the view that we have taken the question does not arise for consideration in this case.

In this case the Official Liquidator, with the authority of the winding up Court, sold the factory with its site, buildings and machinery to Defendant 4 before the date of the attachment before judgment. Therefore the only question for consideration in this case is whether he had authority to effect the sale and if so whether the sale will be recognised as valid by the Travancore Court.

It is not disputed that if the company was not wound up its Board of Directors could transfer the assets of the Company including Immovable properties wherever they are situated. The effect of winding up the company is only to put the Official Liquidator in the place, of the Board of Directors. The only difference is that the Official Liquidator will be under the control of the winding up Court whose officer he is. This is what Sir G. Mellish L.J. says in-''(1873) 9 Ch A 557 at p. 560'' (A) cited above.

From the time of the winding up order all the powers of the directors of the company to carry on the trade or to deal with the assets of the company shall be wholly determined, and nobody shall have any power to deal with f them except, the Official Liquidator, and he is to deal with them for the purpose of collecting the assets and dividing them, amongst the creditors.

The only other condition to be satisfied for validating a sale of Immovable property is that it should satisfy the requirements of the ''lex situs'', i.e. the law of the place where the property is situated. In other words if the ''lex situs'' prescribes any particular conditions or formalities for transferring Immovable property those conditions and formalities will have to be satisfied for validating the sale.

In this particular case it is not disputed that the sale deed was executed and registered in Travancore according to the law of the State relating to the execution and registration of sale deeds affecting Immovable properties. In the circumstances there is no reason to hold that the sale deed executed by the Official Liquidator is in any way invalid1 or ineffective. Such a sale deed having been executed before the date of the attachment, the attachment cannot take effect as against the sale.

Moreover the Plaintiffs, in this case recognised the status of Defendant 2 as the representative of the company by impleading him as additional Defendant 2 in the case. The petition Ext. V filed by Plaintiff 2 for impleading the Official Liquidator shows that the former accepted the validity of the winding up order passed by the Madras High Court. Therefore if he had any objection to the sale of the property by the Official Liquidator he ought to have moved the winding up Court itself. He could have also proved his claim in the winding up Court. After having accepted the validity of the winding up proceedings it does not lie in him to contend that the Liquidator had no authority to execute the sale deed which was approve by the winding up Court.

Learned Counsel for the counter-Petitioner referred to certain English rulings to show that in the case of winding up of a company the winding up Court has jurisdiction to deal with Immovable properties situated in a foreign country. One such case is the - ''Bank of Ethiopia v. National Bank of Egypt and Liguori''AIR 1937 CHN 513 (F)Another case is - ''Banco De Bilbao v. Sancha'' (1938) 2 KB 176 (G).

We do not think that those decisions have any applicability to the facts of this case. The question decided in those cases related to the validity of the acts of a ''de facto'' foreign Government in the matter of dissolution or management of a banking company.

The third case is - ''In Re Cooperman'' (1928) Eng WN 101 (H) In that case Cooperman, a person of Russian origin trading in Belgium was declared bankrupt by the Antwerp Tribunal de Commerce and a curateur was appointed. The majority of the creditors were British and the principal assets were two leasehold houses in Walthamstow in Britain. The Antwerp Tribunal de Commerce authorised the curateur to sell the Walthamstow leaseholds. The curateur moved the English Court for an order that the Walthamstow leaseholds should vest in him or that a receiver should be appointed with authority to sell the leaseholds on his behalf. Accordingly the curateur himself was appointed receiver with authority to sell the leaseholds and retain and deal with the proceeds as trustee in the Belgium bankruptcy. We do not think that this decision also has any applicability to the case in hand. In the first place it was a case of bankruptcy. Secondly, the English Court was moved for an order giving the curateur authority to sell the property. In this case the liquidator appointed by the Madras High Court did not move the Travancore Court for an order authorising him to sell the property.

But the question really depends upon the jurisdiction, of the Madras High Court to authorise the liquidator to effect a sale of property situated in Travancore. We find no reason to hold that the Madras High Court had no such jurisdiction. No question of conflict of jurisdiction arises in this case. There was no attempt by the Travancore Court to wind up the company. If winding up proceedings were started in Travancore also the question might have arisen as to which Court had jurisdiction to deal with the assets available in Travanrore. No such question arises in this case. So long as the assets in Travancore belonged to the company and the liquidator, who represented the company after the winding up order, could deal with the property, and so long as he satisfied the requirements of the ''lex situs'' relating to the transfer of Immovable properties, we find no reason why the sale deed should not be upheld.

In this view of the case it is clear that the attachment cannot take effect as against the sale deed executed by the liquidator before the date of the attachment. The objection of the vendee was therefore rightly allowed by the learned Judge. We confirm the order of the Court below and dismiss this Revision Petition with costs.