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Judicial Miscellaneous Application No. 81 of 1960, decided on 21st August 1967.
O. XLVII, r. 1 Review ‑Power of review ‑ Plot procedural but substantive.
In re: People's Bank of Northern India A I R 1937 Lah. 82 not fol.
Bhagwati v. New Bank of India A I R 1950 E Ph. 111 and Maqsooden Bibi v. Bhano P L D 1965 Lah. 183 fol.
O. XLVII, r. I read with S. 141‑Provislons of S. 141 do not make O. XLVII applicable to proceedings held under Companies Law‑Companies Act (VII of 1913).
, Ss. 141 & 151 Provisions of S. 151 procedural‑Section 141 read with S. 151, empowers' Liquidation Judge to correct error unintentionally or inadvertently made by him.
Padam Sen v. State of U. P. A I R 1961 S C 218 ; Kawdu v. Berar Ginning Co. A I R 1929 Nag. 185 ; Muhammad Hvssain Khan v. Rasool Bux A I R 1948 Sind 124 ; Syed Tufozzool Hossien Khan v. Raghunath Pershad 14 M I A 40 ; Gurdeo Singh v. Chandrikah Singh and Chandrikah Singh v. Rashbehary Singh I L R 36 Cal. 193 and Ananda Prasad v. Sushil Kumar A I R 1942 Cal. 390 ref.
Act borrows entire concepts of English Law‑Power of review iii England exercised by Liqui. dation Judges freely.
Bhagwati v. New Bank of India A I R 1950 E Pb. 111; Ralla Ram v. Amritsar Mutual Relief Fund, Ltd. A I R 1919 Lah. 255(1) and Mussorie Bank Ltd. v. Himalaya Batik Ltd. (1894) 16 All. 53 ref.
Hindustan Batik v. Mehraj Din A I R 1920 Lah. 51 distinguished.
S. 170‑Liquidation proceed ings‑Nature and scope.
Liquidation proceedings are judicial in character but the Liquidation Judge has on several occasions to make decisions which have a stronger colour of being administrative than strictly judicial because the proceedings take place primarily under his own guidance and sometimes even his direction. Moreover, they are carried on with the assistance of the Judge's own officer the Official Liquidator, in a situation in which the company's officers, its members and claimants represent partial interest only.
The Court which has the power of making an order according to law and for the benefit of partially represented interests should be presumed to have the power to change it so as to make it convey his real intention and to prevent it from going wrong by reason of legal or factual misrepresenta tion whether deliberate or not.
Hindustan Bank v. Mehra/ Din A I R 1920 Lah. 51 ref.
S. 202‑Order in liquida tion proceedings‑Open to review under section 202‑Courts under obligation to recall and cancel invalid orders.
Madan Gopal v. Sachindra Nath Sen A I R 1928 Cal. 295 ; In re: People's B ink of Northern India A I R 1937 Lah. 82; In re E. L Cotton Mills A I R 1949 Cal. 69 ; Shankaralal v. Shankaralal A I R 1965 S C 507. and Syud Tufuzool v. Raghoo Nath (1871) 14 M I A 40 ref.
, S. 170 read with Undesirable Companies Act (X of 1958), Ss. 2, 4 & 5‑Managing Director running company in contravention of orders and exposing himself to prosecution under Undesirable Companies Act, 1958‑Cannot claim any salary, remuneration or benefit‑Subscribers to company, beneficiaries of money subscribed and not in pari delicto with Managing Director.
Sesha Ayyar v. Krishna Ayyar I L R 59 Mad. 562 ref.
Appellant in person.
Haziqul Khairi for Respondent.
G. Raymond and A . A. Fazeel : amicus curiae.
Date of hearing : 29th March 1967.
This is an application by the Official Assignee under order XLVII, rule 1, C. P. C. for getting reviewed two orders of this Court, dated the 1st of April 1963, and the 13th of April 1964. The application is dated the 2nd of February 1965, and is accompani ed by another application under section 5 of the Limitation Act for getting the delay that has occurred in making the review application condoned.
2. The Official Assignee has prayed that the two orders be reviewed and that the Managing Director's claims in respect of his salary' be rejected in toto. The grounds for review are stated in the application to be:‑
"3. The implications of the provisions of the Undesirable Companies Act were not appreciated in the correct perspective by the Official Liquidator when he conceded salary on compas sionate grounds to the Managing Director for the period after 22‑10‑1957 in his application (dated 15‑3‑63) under section 185 of the Companies Act.
4. Full implications of the provisions of the Undesirable Companies Act, 1958, were not placed before the Hon'ble Court until 7‑12‑1964, whereafter the debts and claims against the Company were re‑examined in terms of sections 2 and 4 of the Undesirable Companies Act, 1958 according to the order of the Hon'ble Court dated 7‑12‑1964."
More or less the same grounds are repeated in the application made under section 5 of the Limitation Act. In paragraph 2 of that application, the Official Assignee has stated as follows
"2. That the Official Liquidator appreciated the full implica tions of the said provisions (p relation to the claims of the Managing Director, when he re‑examined the debts and claims against the Company in terms of sections 2 and 4 of the Undesirable Companies Act in‑ compliance of the Hon'ble Court's order dated 7‑12‑1964. It was when he proceeded to amend his report dated 14‑1‑1965 as permitted by the Hon'ble Court's order dated 19‑1‑1965, that the Official Liquidator found that it was necessary to apply for review of the earlier orders dated 1‑4‑1963 and 13‑4‑1964 by which the claims of the Managing Director now reported for expunction, have been allowed and held payable pro rata."
3. Before proceeding further I may indicate that the entire order dated the 1st of April 1963, is not to, be reviewed but only that portion of it by which salary at Rs. 500 p.m. was allowed to the Managing Director for the period from November 1957, to May 1961. Similarly, in the order dated the 13th of April 1964, the portion which is sought to be reviewed is that by which all the claims of money of the Managing Director were. approved excepting for his claim to receive Rs. 600 as rent of the premises of Haziq Dawakhana.
4. The Managing Director has opposed the application by submitting his own affidavit dated the 16th of March 1965. The grounds of opposition are that :‑
(i) There is no good ground for review.
(ii) The plea that the orders are erroneous cannot be a ground for review.
(iii) It is wrong that full implications of the law were not appreciated and were not presented before the Court because the orders were made after hearing the parties and after going through the provisions of law on all, the questions that were involved in the matter.
(iv) The Managing Director had agreed during the proceedings in Court to act salary Rs. 500 p.m. because it was being allowed ‑to him from November 1957 to May 1961.
(v) The review application is barred by time because it has been presented after nearly two years of the first order and after ten months of the second order.
(vi) Section 5 of the Limitation Act is not applicable to the circumstances of this case, nor has any good reason been disclosed for condocing the delay.
5. In order to appreciate the above contentions of the parties, it is necessary to briefly state the background of this application. The Bavaqar Co. Ltd., was functioning in Karachi when the Undesirable Companies Ordinance, 1957 was promul gated on the 21st of October 1957. In terms of that law all: undesirable companies legally ceased to function on the 23rd of October 1957. In January 1958, the Ordinance was replaced by the Undesirable Companies Act, X of 1958. The validity of the Act was questioned on behalf of the affected companies by filing fifteen writ petitions under Article 170 of the late Constitution. They were disposed of by a Division Bench consisting of Mr. Justice Shabir Ahmad and Mr. Justice B. Z. Kaikaus, vide their judgment reported as Progress of Pakistan 'Co. Ltd. v. Registrar,. Joint Stock Companies, Karachi (P L D 1958 Lah. 887). The Bavaqar Co. Ltd. whose Managing Director is the respondent in these proceedings was one of the petitioners. Objections to the validity of the Act were overruled by the Court. The objections which were raised by the Bavaqar Co. Ltd. on the basis of its own peculiarities were disposed of as follows :‑--
"16. There is one company which needs special mention and that is the Bavaqar Co. Ltd. of Karachi. The difference in the scheme of that company is that the liability of a member to pay does not cease when he gets a prize and continues till the 100th month. Whether this company is even a greater fraud than others and there is just a pretence that further amount is to be realized from the person who gets a prize is a matter into which it will not be necessary to go, though I must say that there can be little prospect of the realization of the money paid to a prize winner. I would also mention that out of Rs. 90,000 subscription that this Company collected it paid a commission of Rs. 17,000. Why it should bear these expenses of Rs. 17,000 just to collect the subscription is a matter which has not been explained.
59. This finishes the attacks on the validity of the Act. There remains the question raised by the Bawaqar Ltd., that even if the Act be valid, the action taken against it is incompetent because it is not an "undesirable company". The distinctive feature of this company is that, according to the rules that govern its Imdadi Scheme, the person who gets a prize remains liable for the subsequent instalments. The contention on behalf of the Bavaqar Ltd. is that such a scheme is not a specified purpose'. There is little force in this argument. If payment depends on chance and is made on account of a deposit or contribution a 'specified purpose', does not exist and both these conditions are satisfied even in respect of the scheme of this company, Ai I have already explained, a company that runs such a scheme may not be an undesirable company, not because such a scheme is not a 'specified purpose', but because the scheme may not be run as a business, that being an essential condition for an 'undesirable company'. There is no contention before us that this company is not running its Imdadi Scheme for deriving benefit from it. That it is running it for a benefit is apparent even from the fact that the company paid Rs. 17,000 as commission merely for collection of R9. 90,003. Let me add that I am not accepting that the rule of this company that the person who gets the prize remains liable for the succeeding instalments is a bona fide rule. But even if it be bona fide the company still remains an undesirable company."
6. On the 28th of September 1960, the Registrar, Joint Stock Companies, Karachi, made an application under section 7 of Act X of 1958 for winding up a number of companies, including the Bavaqar Co. Ltd. The application was granted, and the Official Assignee of Karachi was appointed to be the Official Liquidator on the 21st of November 1960. On the 15th of March 1963, the Official Liquidator made an application under section 185 of the Companies Act stating inter alia as follows :‑--
"The Managing Director also claims that he is entitled to remuneration/salary for services rendered to the Dawakhana for the above period (November 1957 to May 1961) and he has demanded it at the rate of Rs.' 925 per month in terms of he Articles of Association of the Company. It is submitted that this remuneration was for the entire business of the Company which mainly consisted of Imdadi Scheme. which ceased functioning with effect from 23‑10‑1957 when it was stopped by the Undesirable Companies Ordinance, 1957, and the Managing Director does not appear to be entitled to the remuneration/salary claimed. It' is, however, submitted that the Managing Director may be' allowed his salary at the rate of Rs. 200 per month for the period November 1957 till May 1961, totalling to Rs. 8,600."
The above passage will show that the Official Liquidator objected to the payment of full salary to the Managing Director not on the ground that it was inadmissible but because the amount of work which the Managing Director did in running the Dawakhana was considerably less than his normal duties. The application was oppos ed by the Managing Director who urged that he was entitled to the full salary of Rs. 925 p.m. in terms of the Articles of Association of the Company. The Official Liquidator objected to the payment of full salary only, and during arguments took the stand that the Managing Director had acted illegally in carrying on business after the 22nd of October 1957, yet on compassionate grounds' he conceded that the Managing Director be allowed salary at Rs. 200 per month because he had after all worked for the Dawakhana. One of the reasons for not conceding the demand of full salary at Rs. 925 p.m., was that, in the event of the payment of that amount, no profit would accrue to the Company.
7. After hearing the parties I ordered on the 1st of April 1963 as follows
"I think that it is difficult to draw a distinction between the nature of the liability of the company in so far as the salary of the Managing Director is concerned and the other expenses of the company,: excepting for the fact that the pavement of the salary will cause substantial loss to the company. The Managing Director is in this respect fair is saying that s salary may be reduced in view of the logs that the company would incur on account of his salary only. In these circums tances, it appears to me that he should be allowed salary at the rate of Rs. 500 per month."
8. The above points of view laid emphasis on the payment of fair remuneration in disregard of the illegality of the Managing Director's activity. The illegality was overlooked by the Official Liquidator on compassionate grounds. A reference to the illegality, was casually made but that too with a view to show kindness rather than to take notice of it. The grave implications of sections 2 and.4 of Act X of 1958 (which will be discussed later) were neither in view nor was any reference made to them at all. The Official Liquidator even proposed (vide his application dated the 29th of March 1963) that the Haziq Dawakhana be sold to the Managing Director for Rs. 35,000. It was indeed the Managing Director's counter proposal to pay for it by book adjustments which brought to light the error of the proposal. The Court disposed of the application by the same order of the 1st of April 1963. It was pointed out in the last paragraph of the order that adjustment by making simple books entries could not be allowed because the Managing Director was liable to pay the agreed price in full, whereas the liabilities of the Company towards the Managing Director were payable pro rata since the Company was in liquidation.
9. The above order seems to have given a realization to the Official Liquidator that the problems of this case needed closer attention. He applied on the 18th of April 1953, for a direction as to whether those who had made payment to the Company @ Rs. 5 per month, were entitled to recover that money or not. This reference led to the question as to what was the effect of the Memorandum and Articles of Association of the Company on the Imdadi Scheme. It was held on the 10th of December 1963, that the contributors of Rs. 5 per month were creditors of the Company. In consequence of this finding the Official Liquidator submitted a list of the claims of the creditors. In the order of lye 3rd of February 1964, the Court pointed out certain omissions and inaccuracies of the Official Liquidator who submitted (vide his application of the 19th of March 1964) that pro rata claim of the Managing Director could not be calculated in the existing situation. On the 13th of April 1964, the Court accepted the proposal made by the Official Liquidator, vide his application dated the 22nd of January 1964, that the claims of two creditors, which only had been received, be accepted. The claim of the Managing Director was for Rs. 61,768.96 and that of the other creditor for Rs. 30 only. The Official Liquidator made another reference on the 2nd of November 1964, that the Haziq Dawakhana be transferred to the Managing Director for Rs. 20,000. This time the Court rejected the proposal and give notice to Mr. G. Raymond to appear amicus curiae.
10. When Mr. G. Raymond appeared it was found on the 7th of December 1964, that the preliminary report made by the Official Liquidator was incorrect and that significance of sections 2 and 4 of the Undesirable Companies Act, 1958 was lost sight of. Specific directions were given to the Official Liquidator to correct the report, and to examine the debts and claims of the Company as well as those of the Managing Director in view of sections 2, 4 and 5 of the Undesirable Companies Act, 1958. As a result of the order, the Official Liquidator submitted an amend ed report on the 14th of January 1965. Mr. G. Raymond contend ed, on the 19th of January 1965, that those who had contributed Ra. 5 per month were beneficiaries. The attention of the Official Liquidator was invited to this aspect. On the 7th of February 1965, the Official Liquidator submitted a further report amending the preliminary report of the 15th of November 1961, along with the application for review of the orders of the Court dated the 1st of April 1963, and 13th of April 1964. I have heard learned arguments of Mr. G. Raymond, of Mr. Fazeel as well as those of counselor the Managing Director.
11. Sections 2, 4 and 5 of the Undesirable Companies Act X of 1958 are as follows :‑
"2.. 1n this Act, unless there is anything repugnant in the subject or context‑
(a) specified purpose' means the promotion or the carrying on of any scheme or business except the business authorised and carried on under the provision: of the Insurance Act, 1938, by whatever name called, where by, in return for a deposit or contribution, whether periodically or otherwise, of a sum of money in cash or by means of coupons, certificate, tickets, or other documents, payment at future date or dates of money or grant of property, right or benefit, directly or indirectly, and whether with or without any other right or benefit, determined by chance or lottery or any other like manner, it assured or promised ;
(b) ,undesirable company' means a company which, with objects and business not confined to one Province, is registered under the Companies Act, 1913, and carries on business for a specified purpose or for purposes which, among others,. include a specified purpose and includes a company, association or other body of individuals which, with objects and business confined to the Federal Capital carries on business for a specified purpose or for purposes which, among others, includes a specified purpose ; and
(c) all other words and expressions have the same meaning as assigned to them under the Companies Act, 1913.
3
4. (1) Every undesirable company existing immediately before the commencement of this Act, shall, on such commence ment, cease to function and, notwithstanding anything in the Companies Act, 1913, or in any other law for the time being in force, shall be wound up and dissolved in the manner provided in this Act.
(2) Any transaction with an undesirable company or with any officer or agent acting for or on behalf of such company shall be void.
(3) Any officer or agent for or on behalf of any such company who, on or after the commencement of this Act carries on, or attempts to carry on the business of the company shall be punishable with imprisonment for a term which may extend to three years or with fine or with both.
5. (i) Any officer or agent acting for or on behalf of an undesirable company who has in his possession or under his control any cash belonging to the company shall, immediately after the commencement of this Act, deposit or cause to be deposited such cash with the company's bankers.
(2) Until such time as the official liquidator appointed under section 7 takes into his custody or under his control ill the books, documents and assets of the company, including actionable claims to which the company is or appears to be entitled, every officer and agent acting for or on behalf of the company shall preserve all such books, documents, assets, property, effects and claims and shall be jointly and severally liable for any loss or damage.
(3) Any person who, with intent to evade the provisions of this Act, conceals, destroys, mutilates or defaces any books, documents, assets, property, effects or claims or knowingly allows such concealment, destruction, mutilation or defacement to be caused, shall, without prejudice to any liability to which be may be subject under subsection (2), be punishable with imprisonment for a term which may extend to three years or with fine or with both."
It is unnecessary to examine the application of section 2 to the Bavaqar Co. Ltd. because a Division Bench of this Court has already held in Progress of Pakistan Co. Ltd. v Registrar, Joint Stock Companies, Karachi that the Bavaqar Co. Ltd. is an undesirable company. The provisions of section 4 of the Act are noteworthy, because under subsection (1) of it, it was incum bent on the Bavaqar Co. Ltd. to stop functioning. Under sub section (2) of it any transaction made with the company or with any of its officers or agents was void. Under subsection (3) any officer or agent who carried on or attempted to carry on the business of the company was punishable with imprisonment extending to 3 years or with 'fine or with both. These provisions indicate the error of the recommendation made by the Official Liquidator that salary be paid to the Managing Director on the ground that he had worked for the company. The Managing Director's activity, on the contrary, was a punishable offence. There was no question of rewarding it in the name of compassion. The provisions of law leave no doubt that an attempt to com pensate him for his unlawful acts and fraudulent schemes would be inconsistent with true purpose and import of the law. Com passionate or kind treatment to the Managing Director would be not only contrary to law but also in violation of the rights and interests of those who were the victims of his activity. This aspect of law did not come to light until Mr. G. Raymond appeared, cleared the haziness of irrelevant ideas and spotlighted the true legal object.
12. A reference to the objections (set out above) which have been raised by the Managing Director to the application for review will show that the above‑mentioned import and significance of the law is not denied. What is emphasised is that the orders ,having been passed once, and that too a long time ago, cannot be reviewed owing to technical difficulties. Here again, the technical difficulties were magnified because the Official Assignee invoked Order XLVII, rule 1, C. P. C. only to support the contention that the Court has the power to review its orders. It was argued in reply that the ambit of this rule was narrow and that it was not applicable to proceeding held under Company Law. Mr. Raymond contended that the Court has the power to review orders under section 202 of the Companies Act, 1913. Section 202 is as follows :‑--
"202. Re‑hearings of, and appeals from any order or decision made or given in the matter of the winding up of a company by the Court may be had in the same manger and subject to the same conditions in and subject to which appeals may be had from any order or decision of the same Court in cases within its ordinary jurisdiction."
The Companies Act, 1913 is applicable to the present proceedings which are held under the Undesirable Companies Act, 1958 in terms of subsection (2) of section 7 and section 8 of the latter Act. The two sections are as follows :‑
"7. (1) As soon as may be after receipt of the statement submitted under subsection (1) of section 6, the Registrar shall make a petition to the Court for winding up the company, and thereupon the Court shall make an order for the winding up of the company and shall appoint the official liquidator for such winding up.
(2) After the official liquidator had been appointed under this section, the provisions of the Companies Act, 1913, relating to the, winding up by Court of a registered company shall mutatis mutandis apply in relation to the winding up of the company in respect of which the petition has been made under subsection (1).
8. When the affairs of an undesirable company have been completely wound up, the company shall be deemed to have been dissolved under subsection (1) of section 194 of the Companies Act, 1913."
13. The arguments relating to the applicability of Order XLVII, rule 1, C. P. C., can be conveniently disposed of 'first Mr. G. Raymond contended that the Code of Civil Procedure was applicable to proceedings under the Companies Act, 1913, because, in terms of section 141, C. P. C., it applies to all procee dings in any Court of Civil jurisdiction. The section is as follows :‑----
"The procedure provided in this Code is regard to suits shall be followed, as far as it can to made applicable, in all proceedings in any Court of civil jurisdiction."
This point of view is supported by a number of judicial pro nouncements. See, for instance: In re : People's Bank of Northern India (A I R 1937 Lah. 82) in which the learned Judge has observed as follows:
"It appears to me, however, that the Company Law does not affect the power of review which is otherwise vested in a Judge of this Court, especially as by section 141, Civil P. C. the provisions of the Civil Procedure Code are to be followed in all proceedings in any Court of civil jurisdiction."
The learned Judges' attention was apparently not drawn to the aspect that the power of review conferred by Order XLVII, C. P. C. is not procedural. This has been pointed out by a Full Bench of East Punjab in Bhagwati v. New Bank of India (AIR 1950 E Ph. 111 at pp. 118, 124) and by a Single Judge of this Court in Maqsooden Bibi v. Bhano (P L D 1965 Lah. 183). The Full Bench case deals with the Companies Act, 1913 and the Lahore case deals with the Guardians and Wards Act ; but the principle enunciated in the latter case is clearly applicable to the Companies Act, 1913 also. Mr. Justice Sardar Muhammad lqbal has observed in it as follows :‑--
"Relying on section 141, C. P. C., it was next argued that the orders passed by a Guardian Judge can be reviewed under section 114, read with. Order XLVII, rule l, C. P. C. It is specifically provided in section 141, C. P. C. that the procedure provided in this Code in regard to suits shall be followed, so far as it can be made applicable, in all proceedings in any Court of civil jurisdiction. . There can be no denying the fact that the Guardian Court is a Court of civil jurisdiction and a proceeding under the Guardians and Wards Act is a proceeding in the Court of civil jurisdiction. The Code undoubtedly applies to the procedure of all courts of civil jurisdiction. The provisions of the Code, therefore, will be applicable to regulate the procedure of a Guardian Court. This provision, however, cannot be pressed into service to say that where the Code has created certain substantive rights like the right of an appeal or review, the same also became applicable in similar proceedings. in all Courts of civil jurisdiction. The right of an appeal or review is a substantive right and not a mere right of procedure. Thus section 141, C. P. C. is not applicable in this case, and the provisions of the Code providing for an appeal or review are not attracted to proceedings under the Guardians and Wards Act."
14. "Thus the provisions of section 141, C. P. C. do not make Order XLVII, C. P. C. applicable to proceedings held under the Company Law, but the reason of inapplicability being the dis tinction between procedural and substantive provision, a question arises as to whether section 141, C. P. C. makes section 151, C. P. C. applicable to Company proceedings or not. Before dealing with this argument I may mention that two more arguments have also been advanced in favour of the view that the Court has inherent powers of review in liquidation matters. One of them is that in England liquidation judges used to freely review their own orders; therefore, there is no reason why our courts should not do the same, the reason being that Company Law embodies concepts which have been borrowed in their entirety from England. Since the whole body of this foreign law has been transplanted on our soil ; the method of rearing that plant must also be foreign. In the words of Mr. Justice Harnam Singh in Bhagwati's case:
"company legislation in India has followed the legislation in England. That being so, courts in India are bound to follow the principles laid down in English courts with regard to the same matter. In considering, therefore, the construction of section 15,3, Indian Companies Act, 1913, which is professedly based on the English enactment and which it reproduces,
almost word for word, the language of the English enactment, and which relates to a branch of the law which is entirely English law, the Courts of India are in practice, if not in theory, bound by the decisions of the English Court of Appeal."
Shadi Lal, .J., as he then was, has observed in Ralla Ram v. Amritsar Mutual Relief Fund, Ltd. (A I R 1919 Lah. 255) that a Judge conducting liquidation proceedings can recall a wrong order and rectify a mistake. The reasoning employed by him is that section 169 of the Companies Act of 1882, which corresponds to section 202 of the present Companies Act of 1913, was not restricted to the scope of review provided in the Code of Civil Procedure but that its concept was imported from England empowering a liquidation judge to remove errors. His own words are as follows :‑
The judgment in Mussorie Bank Ltd. v. Himalaya Bank Ltd. (1894) 16 All. 53 lays down the rule that section 169., Companies Act, was not intended only to refer to a case ire which a Judge upon the discovery of fresh matter considers it expedient to pass a fresh order or to review an order passed by him. It is to be observed that this view of the matter is in accordance with the procedure followed by the English Courts in similar circumstances : vide In re : National Assurance and Investment Association Ex‑ pate Munday (1862) 31 Beav. 206."
In the Allahabad case, to which reference has been made in the above quotation, Mr. Justice Knox has noted that an objection was taken to the correction of an error under section 169 on the ground that three weeks had elapsed from the date of the first order. He met the objection as follows :‑
"I am, however, of opinion that section 169 was not intended to refer to a case of this kind in which a Judge, upon the discovery of fresh matter, considers it expedient to pass a fresh order or to review an order passed by him. In the present case there was no rehearing or appeal properly so called. New matter, was brought to the notice of the Judge by the Official Liquidator and upon that matter the Judge reviewed his previous order. I see nothing in the words of the Act to forbid such procedure on the part of the Judge, and apparently the English Courts, subject to a rule almost identical with that contained in section 169, do not consider themselves precluded by the language of section 124 (see section 124 of the English Companies Act, 1882) from reviewing orders passed by them."
15. In the last of the above‑mentioned quotations the mainspring of the argument is not only English practice but also the need of keeping the liquidation record straight according to the facts that came to the Court's notice. Liquidation proceedings are judicial in character but the liquidation Judge has on several occasions to make decisions which have a stronger colour of being administrative than strictly judicial because the proceedings take place primarily under his own guidance and sometimes even his direction. Moreover, they are carried on with the assistance of the Judge's own officer‑the Official Liquidator in a situation in which the company's officers its members and claimants represent partial interest only. A Division Bench of the Lahore High Court did observe in Hindustan Bank v. Mehraj Din (A I R 1920 Lah. 51) that no English Judge can rehear or alter an order made by himself or by another judge after the enforcement of the Judicature Act, 1873 ; but as pointed out by Lindley on Companies in the Sixth Edition of his book, at page 895, an order which did not accurately express the intention of the Judge or was obtained ex parse or was one which in truth was a nullity can be discharged by the Judge that made it. The Division Bench has emphasised its agreement with this point of view by saying :‑--
"We have no difficulty in agreeing with the latter remarks of Lindley as far as Courts in India are concerned . . . .".
The rationale of this view, to my mind, is that the Court which has the power of making an older according to law and for the benefit of partially represented interests should be presumed to have the power to change it so as to make it convey his real intention and to prevent it from going wrong by reason of legal or factual misrepresentation whether deliberate or not.
16. Reverting to the question as to whether section 151, C. P. C., is applicable to company proceedings by virtue of section 141 of that Act, 1 should note that section 151 is a procedural provision : See Padam Sen v. State of U. P. (A I R 1961 5 C 218, 219). The Court can, no doubt, in a special sense, review an order under it. See Kawdu v. Berar Ginning Co. (A I R 1929 Nag. 185, 189) and Muhammad Hussain Khan v. Rasool Bux (A I R 1948 Sind 124). But this does not make the pro vision substantive because such an order is not intended to correct a decision on merits, but merely to rectify what the Court did not or could not intend to do had it been apprised of the correct situation. This is the sense in which the relevant observations in Syed Tuffozzool Hossien Khan v. Rughoonath Pershad ((1871) 14 M I A 40) and Gurdeo Singh v. Chandrikah Singh and Chandrikah Singh v. Rashbehary Singh (I L R 36 Cal. 193) should, in my humble opinion, be understood.
17. Thus section 141 read with section 151; C. P. C.1 empowers the liquidation judge to correct an error which was unintentionally or inadvertently made by him. In this case, as explained above, the situation was not placed before the Court in the correct perspective until Mr. G. Raymond came on the scene and brought to light the true significance of the Undesirable Companies Act, 1958. The error resulting; from this situation can, therefore, be corrected under section 151, C. P. C. and there is no limitation for it if the power to correct such errors is understood to her a part of the power to act with proper under standing and ex debito justitiae. Ste Kawdu v, Bsrar Ginning Co. and Ananda Prasad v. Sushil Kumar (A I R 1942 Cal. 390, 393).
18. Having dealt with arguments based on English practice and C. P. C. I can now return to section 202 of the Companies Act, 1913 which has been reproduced in paragraph 12 above. Its language is wide, but "in Ralla Ram v. Amritsar Mutual Relief Fund, Ltd., Hindustan Bank v. Mehraj Din, Madan Gopal v. Sachindra Nath Sen (A.I R 1928 Cal. 295), In re : People's Bank of Northern India‑In re: E.I. Cotton Mills (A I R 1949 Cal. 69) Courts have held that review is different from re‑hearing' and appeals' which only are permitted under the statute. According to them, there are no re‑hearings' in our country ; therefore, the provision applies to appeals only. Moreover, the words "same manner" and "same conditions" "subject to which appeals may be" made, restrict the scope of the section to the procedure of appeals and to the right of appeals. S. R. Das, J. has in his very learned judgment given in the case of E. I. Cotton tills has traced the history of the provision in English law and has pointed out that before 1873 there was a procedure in England called "rehearing" according to which "an appears from a judge to himself" or "to his successor" could be made. That jurisdiction was taken away by the Judicature Act, 1873 and the word "rehearing" was dropped from the subsequent English Companies Act, but the former language was copied in the Indian Companies Act, 1913. This, according to him, was an anomaly. I feel, with respect, that this should not be called an anomaly because we have no statute like the' Judicature Act, 1873. Moreover, the word "rehearing" appears in Rule 8 of Order XLVII, C. P. C. in respect of the hearing that actually takes place in proceedings of review. The words "same manner" and "conditions" "subject to which appeals may be" made d not appear to create any problem because Rule 3 of Order XVII, C. P. C. contains a similar provision which, runs as follows :‑---
"The provision as to the form of preferring appeals shall apply mutatis mutandis to applications for review."
The argument that' the word "conditions" imports the existence of a right of appeal has been effectively met in paragraphs (14) to (17) of Shankaralal v. Shankarlal (A I R 1965 S C 507) The conclusion is that an' order made in liquidation proceedings is open to review under section 202 of the Companies Act, 1913.
19. The above reasoning is, however, no answer to the objection that the bar of limitation comes in the way. This means that the application made by the Official Assignee under section 5 of the Limitation Act is to be examined carefully. The objection nevertheless does not appear to be of much weight because the orders sought to be reviewed are administrative in nature and not judicial. They were made on administrative references of the Official Assignee, without notice to those who bad subscribed money and who are determinated members of the undefined public whose interest is sought to be protected by the Undesirable Companies Act, 1958. They were merely intended to regulate and' supervise the acts .of the Official Assignee. As to their validity they are clearly contrary to law. As pointed out by the Privy Council in Syed Tuffuzool v. Raghoo Nath, Courts are not only expected to recall and cancel invalid orders I but are under an obligation to do so.
20. In order to establish the invalidity of the orders under review, Mr. G. Raymond has argued that the Managing Director has by running the Dawakhana exposed himself to prosecution and punishment by violating the provisions of sections 2, 4 and 5 of the Undesirable Companies Act, 1958. He, therefore, cannot claim any salary, remuneration or benefits for or on account of such activity. Counsel has further contended that the money that was subscribed was a trust and the subscribers of money were its beneficiaries. Thus the money received by the Managing Director was returnable to the subscribers with all accretions. He has supported this contention by referring to Sesha Ayyar v. Krishna Ayyar (I L R 59 Mad. 562) according to which such subscribers are not in pari delicto with the Managing Director.
21. In conclusion of all that has been said above I accept the applications and reviewing the orders, modify them as prayed.
S. A. H. Application accepted.
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