Thakur Amar v. Venkataram•

the sale effected by respondent No. 2 as the receiwr of the trustees of the debenture holders in July 1954 was valid and binding on all parties concerned to be done by the and could not be challenged as it was sought Official Receiver. the present case Food Controller v. Cork (1923 A.C. 647), Kayastha Training and Banking Corporation Ltd. v. Sat Narain Singh (f 1921] I.L.R. 43 All. 433), Baldeo Narain Sfrigh v. The United India Bank Ltd. ([1915] 38 J.C. 91), State of West Rengal v. Subodh Gopal Bose and others ( 1954 S.C.R. 587), Angus Robertson and others v. George Day (L.R. [1879] 5 A. C. 63), Murugian, P. v. fainudeen, C. L. ([1954] 3 W.L.R. 682), National Assistance Board v. Wilkinson ([ 1952] 2 Q.B. 648), Vasudeva Mudaliar and others v. Srinivasa Pillai and another ([1907] l.L.R. 30 Mad. 426) and The Governor-General in Council v. Shiromani Sugar Mills Ltd. (In Liquidation) (1946 F.C.R. 40), referred to. APPELLATE JURISDICTION : Civil Appeal CIVIL No. 20 of 1955. Appeal the Judgment and Order dated the 29th day of September 1954 of the High Court of Judicature at Madras in Original Side Appeal No. l.13 )f 1954 arising out of the order dated the 9th dav of <\ugust !954 cf in its Ordi~ary t'ie said High Court Original Civil Jurisdiction in Application No. 3542 of 1954. 48 376 SUPREME COURT REPORTS [1955] 1955 M. K. Ranganathan and anothlr v. Governtntnl of Madras and otk1rs. C. K. Daphtary, Solicitor-General Umrigar, Mohan Kumaramangalam for the appellants. Narain, with him) /. India (H. and Rajinder R. H. Dhebar and P. G. Gokhale for respondent No. 1. Samarendra Nath Mukherjee and B. N. Chose for respondent No. 2. N. P. Engineer, (B. Moropant and V. f. Tarapore wala, with him) for respondent No. 3.

1955. April 20. The Judgment of the Court was delivered by BHAGWATI J .-This appeal with a certificate under article 133 ( 1) ( c) of the Constitution is directed against the High Court of J udicaturc at the Judgment of Madras dismissing the appeal of the Appellants and refusing to set aside a sale effected by Respondent 2 of certain properties belonging to the Madras' Electric Tramways (1904) Ltd. hereinafter called the Company, the ground at V epery, Madras and Mylaporc, the machinery cars, etc. and buildings as including his capacity as the Receiver of the trustees debenture holders of the Com pany. to Respondent 3 in The Appellants are the Secretary and President the Madras Tramways Workers Asso respectively of ciation (Registered No. 1_253) a Trade Union registered under the Trade Unions Act. The workmen employed the award of the by the Company are entitled under Special Industrial Tribunal, Madras in I. D. No.

9 of in the Fort St. George Gazette, dated 1953 published the 8th July, 1953 being G. 0. Ms. No. 3024/53 to a payment of nearly Rs. 7,00,000 out of which to the Madras Tramways Workers workers belonging Association alone would be entitled nearly to a sum of Rs. 4,35,000 and are thus the major creditors of the Company. The Company was incorporated in England its principal office situated at No. 1, Rundalls Road, Vepery, Madras-7 and was running the Tram way Service in Madras with_ licence issued to it by the Government under the Tramwayi Act. It had issued 1955 M. K. Ranganathan anti anotlur v. Govemmtnt of MatirOJ and otherl BhagwatiJ. 2 S.C.R. SUPREME COURT REPORTS By an deeds made the payment of all moneys the deben 1300 First Debentures of £100 each and the Beawar Trust Ltd., ture-holders had appointed Indenture made trustees. England England on the Company the 13th October 1924 charged by way of first charge in favour of the trustees all its undertaking properties and assets the time including its uncalled being both present and future capital with the time the debentures and the security of being owing on such charge was to rank as a floating charge.

By the 26th subsequent March, 1925 and 6th July, 1950 certain immovable the company were mortgaged properties belonging trustees. The said Trustees appointed Respondent 2, the Managing Director of to day management of the the Company and day Tramway Service and of the Com their Receiver~ He took possession as such pay, as Receiver, from the midnight of 11th April, 1953 of all the assets of including moneys in the Company and after that date bank to the credit of the Tramways Service was suspended and still remains suspended. at Madras dated the said the business of the Company favour of it had ceased the Directors for winding up One J. B. Beardsdl, one of Company filed 0. P. No. 419 of 1953 as the duly con stituted Attorney of the Company the ground that it was unable to pay its Company on debts and to carry on its business .. the winding up of the Company was made An order for the 20th January, 1954 and the Offi bv the Court on cial Receiver, High Court, Madras, was appointed Official Liquidator.

Since all the assets including the in possession of Respon moneys of the Company were dent 2, the Com charge of anything except the records of pany. the Official Receiver was unable Soon after dent 2 advertised January, 1954 of the Company. At he stated time being subject the order for winding up the Respon the 23rd the sale of the properties and assets the end of the conditions of sale the High Court in paragraph 7 that "the sales are for the approval of the newspapers on 6-83 SC India/59 1955 M. K. RanganaJ/um aad anotM v. Govemmmt of M adra.s and others - Bhagwati J.- ... 378 SUPREME COURT REPORTS [1955] at Madras and such approval for accepted offers the purchaser". it will be for the undersigned to obtain free of all costs to thereon in excess of the Company against At the time of the order of winding up, two suits were pending in the High Court, C.S. No. 191 of 1952 the State of Madras for filed by electric Rs.

1,33,204-9-0 and interest to have Leen collected by the State of charges alleged Madras payable by the Company and paid by the company under protest and C.S. No. 368 of 1953 filed by the State of Madras against the Company for the recovery of Rs. 9,26,123-2-3 with interest thereon, being the diflerence to be due in rates applicable to the Com old rates and pany. During the pendency of suits Res pondent 2 gave in Application No. that he 4533 of 1953 would not without the orders of the High Court dis pose of any of the assets of the Company which were in his possession till the disposal of the suit C.S. No· two suits aforesaid were 368 of 1953. The gether and were disposed of by a common judgment on the 16th Man:'.h 1954. in Civil Suit No. 368 of 1953 the electric charges an undertaking the revised the said alleged respect On to buy the Company the 16th July 1954 Respondent 2 agreed to sell the movable proper and Respondent 3 agreed the particulars of which were set ties of out in the agreement into on that date, for a price · of Rs.

4,01,658 of which half was paid on the other half was s;gning of the proceeds of sale to be agreed made by the purchasers of the assets as scrap. the agreement and the to be paid out of entered the assets of On he 23rd July 1954 the Official Receiver, High filed an appli Court, Madras (Respondent 5 herein) cation No. 3542 of 1954 for setting aside 'sale the Company on the grounds, inter alia, that it was prejudicial General body of unsecured creditors, had been concluded with undue haste and without in violation of Respondent adequate publicity 2' s said undertaking the Court. It also asked for the Respondent 2 injunction interests of restraining the said 1955 M. K. RanganaJhan and another v. Govnnmmt of Madras and others l1hagwati J. 2 S.C.R. SUPREME COURT REPORTS 379 either and the Respondent 3 handing over taking over or breaking up the assets purchased by him pending the disposal of the said application. to have that even the benefit of the remedy of realising insolvency and secured to the secured creditors, This application was based on a report of the Offi the relevant in which after setting out cial Receiver though under section facts he submitted 729 Indian Companies Act the Company insolvent was governed by which was admittedly the respective rights rules prevailing with regard to debts the secured and unsecured creditors and provable and valuation of annuities governing creditors administration the liquidation and were en generally stood outside the security and titled proving before him for the deficiency, the proper ties of the Company could be sold for a price higher the amount due to the Trustees of the debenture there was a possibility of a surplus coming holders into his hands for the unsecured cre If the Respondent 2 proved before him for ditors. any deficiency due it would the rights of unsecured creditors, and certainly affect the secured creditors might realise the moreover though security, the unsecured creditors and proper pncc was obtained.

He rests of the unsecured creditors just and neces to have a fair valuation ascertained and an enquiry held Respondent 2 in favour of Respondent 3 was bona fide and for a proper price. Respondent 2 filed an affidaYit in reply in August 1954 contending inter alia, ( 1) that this had been est, accepted bona fide, (2) condition as to the previous sanction of the Court was inserted because that he had the Court in C.S. No. 368 of 1953 and that lapsed with the dismissal of the said this undertaking he had been suit on the 16th March 1954, advised by the Solicitors the deben ~ure trustees that it was unnecessary for him to obtain that the offer by the Respondent 3 was that he had received and to ascertain whether the sale by (3) in England for that in the advertisement it will be in the interests of the undertaking that a fair submitted therefore it was 1955 M. K. Ranganathan and another v. Government of Madras and others · Bhagwati ]. 380 SUPREME COURT REPORTS [1955} the sanction of the Court and that he had been in structed not to apply for such sanction the sale was bona fide and he had secured as good a price as could be obtained.

( 4) the said sell the assets of application with Justice Balkrishna Ayyar judgment and order dated the 9th August By its (in Cham- 1954 Mr. costs. bers) dismissed the question whether The learned Judge held the undertaking given by Respondent 2 had violated to the application before him, him was not germane the Respondent 2 did give wide that undoubtedly publicity of his intention that it could not be said that the sale was Company, sub rosa on the ground of want of wide publicity to the intended sale of the Company's assets received the Respondent 3's offer was the best offer by the Respondent 2 looking both the abstract of the affidavit of the Respondent 2 offers appended to the other The offers pointed learned Judge the offer of the further the said Corpo Corporation of Madras ration had not made any firm offer at all and that the offer of one A. Chettiar ot Rs. 4,25,000 made on 5th August 1954 during the application was an offer made by a person who did not appear to status.

The him to be of a man of sound recorded the fact learned Judge in his judgment also the Res that during the hearing of the application the Madras Municipal pondent 3 offered · to sell Corporation the assets he had purchased at the same price which he paid the Corporation were not prepared and looking to him by Respondent 5. it but to accept the offer. referred and said that the hearing of application, financial entire the said The Respondent 5 accepted judgment and decision and did not prefer any appeal against the the Appellants who were not parties to same. But the proceedings applied for and obtained from the said decision. High Court leave to appeal also was "dismissed by the High Court This appeal with wsts. on the 24th September 1954. The High Court differed. from the finding of the Trial Court and that due pt1blicity had not . been given to 1!155 M. K. Ranganathan and another v. Governintnl of Madras and others Bhagwati ]. 2S.C.R. SUPREME COURT REPORTS 381 the sale in favour. if the matter rested intended sale and observed merely on a decision of that point they would have allowed the appeal and set aside the sale.

They how ever held that in the absence of fraud or want of bona fides on the part of the seller along with that of the the Respondent 3 could further considered not be set aside. The High Court the question whether the said sale was void without the the Court in view of section 232 that ques of the Indian Companies Act and answered further held that a secured creditor had a right to realise his secu the court and rity without seeking remaining outside the winding up. Being aggrieved by the said the negative. The High Court the assistance of leave of the High Court the Appellants applied for appeal the High Court on the 24th September 1954. to this Court and such judgment and decree of leave was granted by either to raise to have allowed the circumstances. The bona fides of the Respondent 2 in the matter of the sale were not chal!tnged in the Courts below or before: us and there were concurrent findings of fact that the price obtained by Respondent 2 was the best price available under It learned Solicitor-General was however urged by the High Court, having for the Appellants:-(1) found that due publicity had not been given intended sale, ought not the Respon dent 3 at that stage the question as to whe the Court had any power or jurisdiction to set it was vitiated by fraud or (2) that the sale by Respondent 2 being a sale held with the winding up Court was void under out leave Indian Companies Act.

The section 232(1) of the Re~pondent 3 to raise the High Court had allowed it was inasmuch as question even at a pure question of law and the learned Solicitor-Gen rightly did not press the first conten tion before us. The main argument centered the second contention, viz., whether the sale effected by the Respondent 2 wihout the winding up Court was void and he~e liable the ground that for want of bona fides and sale except on to be set aside. late stage leave of therefore 382 SUPREME COURT REPORTS (1955] 1955 The decision of this question construction of section 232 of Act, which runs as under:- turns upon the true the Indian Companies M.K. Ecanganathan and onotkr v. GoDcrnmmt of Madras and others Bhagwati J. "(l) Where any company is being wound up by or subject the Court, any attach the supervision of in force without leave ment, distress or execution put of the Court against the estate or effects or any held without leave of the Court of any of the properties the wind of the company after the commencement of ing up shall be void.

(2) Nothing in this ings by the Government". sale held It may be noted without leave of the Court of any of the properties" underlined above were inserted by Act XXII of 1936. ( 1) was almost in Before this amendment section 232 identical the English Companies Act of 1948. terms with section 228(1) of the words "or any section applies to proceed Two other section~ of the Indian Companies Act may be noted in this context, viz. section 171 :- "When a winding up order has been made or a provisional no suit or liquidator has been appointed other legal proceeding shall be proceeded with or com menced against terms as the Court may Court, and subject impose. " and Section 229 :- the company except by leave of to such respective respect future and contingent "In the winding up of an insolvent company same rules shall prevail and be observed with regard rights of secured and unsecured the. valuation creditors and to debts provable and to liabilities as of annuities and the time being under the law of insol are in force to the estates of persons adjudged vency with insolvent; and all persons who in any such case would to prove for and received dividends out of be entitled the assets of the company may come winding up, and make such claims against the com pany as they respectively are to by virtue of this section; " which correspond respectively the English Companies Act of 1948. to sections 231 and 317 in under entitled 1955 M.K. Ranganathatr and another v.

Govemmmt of Madras and others Bhagwati ]. 2S.C.R. SUPREME COURT REPORTS 383 The position of a secured creditor m up of a company has been thus stated bury in Food Controller v. Cor!\(1): the winding by Lord Wren It is This immaterial to assert his "The phrase the extent of the liquidator, is, with reference if used, as it often to be contrasted with in winding up or not. 'outside the winding up' is an in Palmer's Company Precedents intell igible phrase to a secured creditor, say a mortgagee. The mortgagee of a company in liquidation in a position to say "the mortgaged property the mortgage my property. to me whether my mortgage I remain outside the 'winding up' and shall enforce my rights as mort the case in gagee". right, not which such a creditor prefers as a mortgagee, but as a creditor. He may say 'I will in respect of my debt'. If so, he comes into the winding up". It is also summarised Vol.

II, page 415: "Sometimes the mortgagee sells, with or without the concurrence of in exercise of a power of sale vested to exercise the power not necessary of -;ale, although orders giving such liberty have some times been made". the winding up The secured creditor and can realise his security without if he files a suit or takes winding up Court, though of his realisation (corresponding security he is bound under section 231 with section 171 of the Indian Companies Act) to ob the winding up Court before he can do so although such leave would almost automatically Section 231 has been read be granted. together with sequestration, attachment, section 228(1) distress or execution referred to in the latter have ref erence the Court and if the creditor has resort to those proceedings he cannot the estate or effects of the put them Company aL;· the winding up the winding up Court. The without in him by the mortgage.

It the commencement of legal proceedings to obtain liberty to proceedings taken through the leave of thus outside leave of leave of against (1) 1953 Appeal Cases 647. 384 SUPREME COURT REPORTS [1955} 1955 M.K. RanganatlilJn and anolher v. Govtrnmlnl of Madra.s and others Bhagwati J. in section 317 are also supplementary provisions the provisions of section 231 and emphasise the posi tion of the secured creditor as one outside the wind in regard to the ing up, the same exercise of those position as he would be under the Bankruptcy Act. the secured creditor being, rights and privileges, the position of the Indian Com The corresponding provisions of incorporated from panies Act have been almost bodily those of the English Companies Act and if there was the secured creditor_ nothing more, here also would be that obtaining England and he would also be outside the winding up and a sale by him without intervention of the Court would be valid and could not be challenged as void under section 232(1) of the Indian Companies Act. the same as though the addition of It was however urged these words did not find the properties" had changed words "or any sale held without leave of the Court of any of the position of secured the secured creditor and even creditor realised intervention the security without of the Court such sale, if effected by him without the It was leave of the winding up Court, was void. their place pointed out that in the corresponding section 228(1) of the English Com therefore even though any attachment, panies Act and distress or execution put leave of the in force without the estate· or effects of the company Court against the winding up was void after the commencement of the section 232 ( 1) as it originally the terms of stood, the words "or any sale held without leave of the company the Court of any of to include not only a sale ,held were wide enough the Court but also a sale through effected by the interven the sale was by private tion of the Court whether treaty or by public auction.

It was contended on the other hand on behalf of the contesting Respondent, Respondent 3, that the amendment was made in order to get over the decision of the Allahabad High Court in Kayasth~ Trading and Banking Corporation Ltd. v. the secured creditor without the intervention of the properties" of 2S.C.R. SUPREME COURT REPORTS 385 Sat Narain Singh(1 ) and that in any event on a construction of section 232(1} as amended "any sale held" had sales held by or effected the Court and not sales effected itor without the words to. the intervention of the secured cred through the Court. reference in the context . only the intervention of 1955 M.K. Ranganathan and another v. Government of Madras and.others Bhagwati J. in pursuance the property of The decision of the Allahabad High · Court ahove to ha<l hel<l on a construction of section·232(1) that an execution was not put in judgment referred as it then stood, force merely when <lebtor was sold thereof, but it was pur in force when the property was attached and hence where the property of an insolvent company was at the <late of the commencement of the tached prior winding up but was actually sold subsequent to such·· date, the sale was not voi<l and could be upheld.

There was an earlier decision of the Patna High Court Baldeo Narain Singh v. The United India Bank Ltd. () in which a contrary decision had been reached exactly under simiiar that · the decision of the · Allahabad High Court was got over by inserting this ' amendment by Act XXII of 1936. It is well-known resolved and circumstances. .conflict was it can be to remedy. referred The statement of objects and reasons is certainly the construction of a sta not admissible as an aid to for the limited pur tute. But pose of ascertaining the conditions prevailing at the sponsor of the Bill to intro time which actuated duce the same and the extent and urgency of the evil State of West Bengal v. which he sought Subodh Gopal Bose and Others( 3 ) The amendment of section 232( 1 inserted by Act XXII of 1936 was de signed in Kayastha decision of the Allahabad High Court Trading and Banking Corporation Ltd. v.

Sat Narain Singh(1) and it would be permissible to refer to portion and reasons for the extent and urgency the purpose of ascertaining the evil which was sought to be remedied by intro It follows ducing to prevent such sales as were upheld by the · of the statement of therefore objects ) the amendment. (1) [1921] T.L.R. ·f3 Allahabad 433. (2) (1915] 38 Indian Case$ 91. (3) (1954] S.C.R. 587, 628. • 386 SUPREME COURT REPORTS [1955] . \ M

1955. - amendment could. not have been intended . to .bring within the sweep of the-general words"or any sale held ·i:::t;!~~~:·an without the leave of the Court of any of the proper- ties" sales effected by the secured. creditor outside the Winding up. _ v. Government of . ' l!Iadrasandothers Even apart from this intendment there are certain canons of construction which also tend to support the Bhagwati J • -· same conchision. Prior to the amendment the law was . well-settled both in England and in India .that the secured creditor.was outside the .winding up and he could realise his security without the intervention of the. Court by effecting a sale of the mortgaged pre~ . mises by private treaty or by public auction.: It was only when the intervention of the Court was sought either by_ putting in force any attachment, distress or execution within the meaning of section 232(1) as it stood before the amendment or proceeding with or ·, commencing a suit or other legal proceedings_against the company within the meaning of section 171 that leave of the Court was necessary and if no such leave was obtained the remedy could not be availed of by the secured creditor.

The sale of the mortgaged pre mises was also brought by the amendment on .a par with the attachment, distress or- execution put- in force at the insfarice of the secured credifoi .. and ha virig regard to the context such sale . could orily be construed to be a sale held through the intervention of the Court and not one effected by·. the secured creditor outside the winding up and without the intervention of the Court. ' .. · _It is a well-recognised rule . of construction that . "when two or more words which are susceptible of analogous meaning are coupled together. noscunter a sociis, they are understood to be used in their cognate sense. They take, as it were, their colciur from each -- other, that is, the more general is restricted to · a sense analogous to the less_. general. (Maxwell ou Interpretation of Statutes, Tenth Edition, p. 332). The Judicial Committee of the Privy Council also · · expressed itself in similar terms in Angus Robertson ) : - & Others v.

George Day(1 (1) [1879) L,R. 5 A.O. 63, 69. 1955 M. K. Ranganathan and anothn v. Govmimmt of Madras and other.r Bhagwati J. 2 S.C.R. SUPREME COURT REPORTS 387 is a legitimate the context the properties" have been used held without leave to con rule of construction an Act of Parliament with reference to "It strue words words found in immediate connection with them". in which these Having regard therefore of the Court of words "any sale any of juxtaposi tion with "any attachment, distress or execution put into force without legitimate construc e~tate or effects" they refer only to sales intervention of the Court and not the secured creditor outside 10 sales effected by winding intervention of Court. it would be a them that to · be put upon through the the Court against up and without leave of There is also a presumption against ration of law and that Interpretation of Statutes, 10th Edition, at page in the following terms:- implicit alte is enunciated by Maxwell on 81 intend infringe rights, or legislature would terms or by clear principles, "One of these presumptions In all general matters outside to make any substantial alteration it explicitly declares, either implication, or, legislature does not the law beyond what in other express the immediate scope and object of the words, beyond limits statute.

It is in the last degree the law remains undisturbed. overthrow improbable fundamental depart from the general system of law, without expressing its intention with irresistrble clearness ................ " This passage from Maxwell was approved of by Their Lordships of the Privy Council in Murugian, P. v. Jainudeen; C. L. (1) and Their Lordships agreed that the law. was correctly stated in the passage just cited. To the Court the observations of the same effect are also of Appeal in National Assistance Board v. Wilkinson (2) is not to be taken where it was held that the Statute the general as affecting a fundamental alteration law unless that conclusion. that case at page 658 Lord Goddard, C. J. observed :- it uses words pointing u11mistakably In \ l) [1954] 3 Weekly Law Reports 682, 687. (2) [1952] 2 Q. B. 648. 1955 Al. K. J?anganathafi· and· another · v. Govtrnmtnl of Madras and other$ Bhagu; ali 'J~ 388 SUPREME COURT REPORTS [1955] ' the' amendment to be put upon the 'properties" by it expressly declares. the amendment was .• ,. "But it 1nar ·be presumed legislature to make a substantial alteration m does not' intebd the law beyond what In Mi11et V. Leman('), Sir ·John Romilly, M. R. stated as a principle ' ofrc-0ristruction which could not be disputed that 'thergeneral' words of the Act· are not to be so the previous policy of the law, construed · as.·· to alter unless n-o ·sense• ·or meaning can be applied to those the "intention of· preserving words· consistently: with the: existing policy ··untouched' ". '·· 'IC the construction sought ieave of the Court of words "or'' any"s:fre held without the Appellants were accepted it would effect a fundamental alteration in t!l'e law as it stood- before inserted in section 232(1)' by Act XXII of 1936: Whereas be the secured creditor stood out side the winding up and could if the mortgage deed so' provided, the interven realiSe his security without tion of- the Court · by effecting a sale either by private rio such sale could be treaty" or by public auction, effected 1 ·by him after the amendment and that was the law which certainly a fondament:il alteration could not be effected unless one found words used that conclusion or which pointed unmistakably unless such irresistible to the circumstances under clearness.

Havirig section 232(1) which the amendment was inserted in by Act XXII of 1936 and also having regard the Legis context we are not''prepared lature in inserting that amendment to effect a irresistible change of policy clearness. - Such -a- great and sudden i'. could not •be attributed adopt the narrower wou !d 'he legitimate therefore to amendment interpretation of rathfr · than· an· interpretation -which would have the - the Privy contrary effect. Council "iii Vasude11a Mudaliar & Others v. Srinivasa Pillai & another('). intention was expressed with the observations of those words of the Legislature to hold that fundamental law with alteration intended regard (Vide (I) [1855] 20 Beav. 269. ·' - , (2) \l 907) L L. R. 30 Madras 426, 433. .• · ' 1955 M. K. Ranganatho11 and another v. Governmtn/ nf Madras ani otki•s •· Bhagwati ]. 2 S.C.R. SUPREME COURT REPORTS 389 171 enacts to such a general to be found companies and in this connection It may be observed the company excern by that· sec provision with regard to suits or other legal procee<lings to be proceeded with or commenced against the company after a winding up order has been made and lays down that no suit or other legal proceedings shall be proceeded with or commenced against leave of terms as the Court may the Court and subject impose.

This general provision supplemented by the 1 supplemental provisions respectively in sections 229 and 232(1) of the Act. Section 229 speaks of the application of insolvency rules in wind . section 232(1) ing up of insolvent attachments, exe speaks of the avoidance of certain cutions, etc., put into force without the leave of the estate and effects of the . company Court against and also of any sale . held without the leave of the Cour.t of any of t!1e properties of the company after the winding up. Section 229· the '.commencement of the secured creditor gene the position of recognises rally, the winding up but enables him in outside the event of his desiring to take the benefit of the to value winding up proceedings the 'same and share of the assets of thf' company just in the same way as he would be able to do in the case of insolvency under the Presidency Towns Insolvency Act or the Provin cial Insolvency Act.

Section 232(1) also has reference to legal proceedings in much the same way as proceedings envisaged by section 171 of the Act and the attachment, distress or execution put in force or the sale held are all of them legal proceedings which can only be resorted through .the intervention of the Court. The word "held". in connection with the sales contemplated within terms of the amended support to this conclusion and this section also conclusion is further terms of section fortified by the 232(2) which says that nothing in this section . applies to proceedings by effect the Government, indicating that wbat are referred to in section 232(1) are proceedings within the meaning of that term as. 11seJ in section 171 of the Act. to prove his debt, in the distribution "1955 M. K. Rangaruzt/u111 and another •• Governmmt of Madras and others BhagwaJi J. 390 SUPREME COURT REPORTS [1955] The Federal Court also put a similar construction on the provisions of section 171 read with section 232(') of the Act in The Governor-General in Council v.

Shiromani Sugar Mills Ltd. (In Liquidation)('): indicates than the ignorance of in liquidation laid down by law. Moreover, for more "Section 171 must, in our judgment, . be construed to other sections of the Act and the with reference general scheme of administration of the assets of a the Act. In company particular, we would refer to section 232. Section 232 to us to be supplementary to section 171 by appears that any creditor (other than Government) providing who goes ahead, notwithstanding a winding-up order it, with any attachment, distress, execution or sale, without the previous leave of the that such steps are void. The ref Court, will find leave of the Court erence to "distress" initiation of original is required the nature of a suit in an ordinary proceedings the scheme of the applica Court of tion of the company's property in the pari passu liabilities, envisaged in section 211 and faction of its other sections of the Act, cannot be made to work in co-ordination, unless all creditors (except such secured creditors as are "outside the winding-up" in the sense in Food indicated bv Lord W renbury in his speech .Controller v.

Cork( ) at page 671) are subjected as to the company to their actions against the Court. Accordingly, in our the control of ment, no narrow construction should be placed the words "or other in section 171. can and should be held In our judgment, to · cover distress in the In our view, such proceedings are ordinary Courts. the company, as con other legal proceedings against trasted with ordinary suits against the sale effected We are therefore of the opinion that the Trustees of by Respondent 2 "' the Receiver of the debenture-holders on the 16th July 1954 was valid could not and binding on all parties concerned and be challenged as it was sought to be done by the words and execution proceedings legal proceedings" the· property of the company". (I) [1946] F. C. R. 40, 55. (2) 1923 A.G. 647. • 1955 M. K. RangQll/Jthan ""' ,,,,,,,Mr .... Madns ad oth6rs G~•f ~i]. 2 S.C.R. SUPREME COURT REPORTS 391 Official Receiver. up by the High Court as under:- The position was rightly summed "W e the position such a power, that no leave of Court was needed before the Receiver appointed by the power the mortgagee debenture-holders exercised of sale and that as there is no allegation of want of bona ft.des or recklessness or fraud against the Receiver it would follow that the in exercising sale held by the Receiver convey the purchaser and that such a sale cannot be avoided on the ground either of want of due notice given by the Receiver before effecting the sale or on the ground of undervalue".

The result therefore is that the appeal fails and must be dismissed with costs of the contesting Respondent 3. The other Respondents who have appeared before us will bear and pay their own costs of the appeal. is valid and effectual OM PRAKASH GUPTA ti. THE ST ATE OF UTT AR PRADESH. [VIVIAN BosE, BHAGWATI, JAGANNADHADAS, VENKATARAMA AYYAR, S1NHA and IMAM, JJ.] 1955 4jlril :u Government servant-Order of dismissal-Suit fOt" declaration that order dismissing the appellant from service was. illegal-Court fee paid on an alte.-native claim fol" damages which was subsequently given up-Refund of-Whether could be granted-Arrears of pay- Claim for-LApse of suspension order after order of dismissal. The appellant, a member of the United Provinces Civil (Execu tive) Service, was suspended from service with effect from the 24th August, 1944, pending aP enquiry into his conduct. As a result of enquiry and report by the Commissioner, the Government passed an order on the 25th November, 1944, dismissing the appellant service, which order was served on the appellant on the !st Decem ber, 1944.

The appellant instituted a suit for a declaration that the order of dismissal passed against him was wrongful, illegal and inoperative, and that he continued to be in service and was entitled to a decree for recovery of arrears of his sal:rry. The plaint included an alter that the order of dismissal was native prayer for a declaration ~. . . ~·. ., .. l