Holding

An appeal from the order of a Single Judge under Sections 397 and 398 read with Section 403 lies to the Division Bench of the same High Court under Section 483, and the lack of procedural rules does not deprive a litigant of that statutory right.

Summary

The appellant filed a petition under Sections 397, 398 and 403 of the Companies Act, 1956 seeking determination of liabilities of Eastern Tea Estate (P) Ltd. The parties compromised, agreeing that no auditor would be appointed and that the Court would decide liability based on the 1973 balance sheet. A Single Judge of the Gauhati High Court computed the liabilities, which the appellant challenged by filing an appeal before the Division Bench. The key issue was whether an appeal from the Single Judge’s order under the said sections lies to the Division Bench under Section 483 of the Act, despite the absence of specific procedural rules. The Supreme Court held that Sections 397, 398 read with Section 483 expressly provide for an appeal to the same High Court in the same manner, and that lack of procedural rules does not extinguish the statutory right of appeal; the High Court may frame appropriate rules. Consequently, the appeal was allowed, the Division Bench’s computation of liability (Rs 6,81,299.67 payable by the appellant) was upheld, and the appellant was directed to pay the amount with interest for delay.

Issues considered

Whether an appeal from the order of a Single Judge in proceedings under Sections 397, 398 and 403 of the Companies Act, 1956 lies to the Division Bench of the same High Court under Section 483.
Whether the absence of specific procedural rules for such appeals bars the filing of the appeal.

Legislation cited

Companies Act, 1956s. 397, s. 398, s. 403, s. 483

Subjects

Companies Act 1956Section 483Appeal from Single JudgeDivision Bench jurisdictionProcedural rulesLiability computationCompromise settlementHigh Court jurisdiction

Judgment

SMT. ARATI DUTTA
A v.
EASTERN TEA ESTATE (P) LTD.

NOVEMBER 13, 1987

B [SABYASACHI MUKHARJI AND G.L. OZA, JJ.]

Companies Act 1956: Sections 397, 398, 403 and 483-Appeal
against decision of Single Judge of High Court-Whether lies to Divi-
sion Bench-Absence ofprocedural rules-Effect of.

Practice and Procedure: Appeal against decision of Single
C Judge-Absence of procedural rules-Cannot take away litigant's right
to file and jurisdiction of High Court to dispose of such appeals-High
Court to frame Ru/es under its Rule-making power.

The appellant filed a petition under Sections 397 and 398 read
D with Section 403 of the Companies Act, 1956 in respect of the affairs of
the respondent firm which was disposed of in terms of the compromise
arrived at between the parties. The parties agreed that no Auditor need
be appointed for the determination of the liabilitY., and that the determi-
nation as per the 1973 balance sheet should be left entirely to the Court.
In accordance with the said compromise, the parties filed their balance
E sheets regarding the payments made by them which related to liabilities
as on 31st December, 1973.

A Single Judge of the High Court computed the liabilities of the
parties on that basis.

F The appellant preferred an appeal before the Division Bench
against the aforesaid decision. The Division Bench held that as no .~

Letters Patent was applicable to the High Court there was no provision
for an appeal against the judgment of the Single Judge and dismissed
the appeal.

G On the question: whether an appeal lies to the Division Bench
under section 483 of the Companies Act, against the orders of a Single
Judge,

Disposing of the appeal,

H HELD: Sections 397 and 398 read with section 483 of the
1070
SMf. ARATI v. EASTERN TEA ESTATE [MUKHARJI. J.] 1071

Companies Act, 1956 indicate that an appeal would lie in the same A
manner to the same court. Naturally and logically, therefore, an
appeal from the decision of the Single Judge would lie to the Division
Bench. [1076E·F]

Shankarlal Aggarwal & Ors. v. S.L. Poddar & Ors. A.I.R. 1965
S.C. 507 followed. B

Shanta Genevienve Pommerat & Anr. v. Papers Pvt. Ltd. & Ors.,
A.LR. 1983 S.C. 269; Mis. Go/cha Investment (P) Ltd. v. Shanti
Chandra Bafna, A.I.R. 1970 S.C. 1350 and Mis. Tarapose & Co. v.
Cochin Shipyard Ltd., A.I.R. 1984 S.C. 1072 referred to.
\....
--rlf" -
' Absence of procedural rules does not take away a litigant's right C
to file appeals against the decision of Single Judge when the statute
confers such a right specifically, and the jurisdiction of the High Court
to dispose of such an appeal, if so filed. If there are no Rules, they
should be framed by the High Court in its jurisdiction of Rule-making
power for filing and disposal of such appeals. [1076G-H] D

In the instant case, though the present application was relating to
sections 397 and 398, and as it arises in respect of the orders passed
under those sections, the provisions of section 483 would be attracted
and an appeal would lie to the Division Bench. [1073F-G]
E
[The High Court found that only a sum of Rs.6,81,299.67 was
payable by the appellants to the respondent. The Court is of the opinion
that the High Court was right in its determination, and that is the sum which
should be the liability of the appeUant. AppeUant directed to pay the
aforesaid amount to the respondent in full settlement of the dues.I [1077E·G I
F
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1510
of 1987 etc.

From the Judgment and Order dated 4.6.1987 of the Gauhati
High Court in F.A. No. 19 of 1984.
G
Dr. Shankar Ghosh, Gobind Das, Ashok Sen, S.N. Mukharji,
N .R. Choudhary and G .S. Chatterjee for the appearing parties.

The Judgment of the Court was delivered by

SABYASACHI MUKHARJI, J. These appeals by special leave H
1072 SUPREME COURT REPORTS [1988] I S.C.R.

A relate to the affairs of M Is. Eastern Tea Estate (P) Ltd. It was of two
branches namely, the Dutta's and the Choudhury's. Due to death and
lack of cordiality between the erstwhile partners the two branches
first drifted and then parted company as it unfortunately is the fate of
so many Indian concerns and there were disputes and litigations in
Court.
B
The Civil Appeal No. 1510 of 1987 arises from a judgment and
decision of the Division Bench of the High Court of Gauhati dated 4th
June, 1987. It appears that that a petition was filed originally by the
appellant under sections 397 and 398 read with section 403 of the
Companies Act, 1956 (hereinafter called 'the Act'). The company
petition came to be disposed of on 4th February, 1977 in accordance -~--
'
C with the compromise arrived at between the parties. The said
compromise comprised of inter alia, two relevant paragraphs, for the
present purpose, which read as follows:

"1. Mrs. Arati Dutta will take over Chandana T.E. and
D Choudhury group will take over Martycherra T.E. on
25th January, 1976.

2. The Bank liability of the Company in respect to
Martycherra T.E. amounting to Rs.2,20,000 (Approx.)
shall be shared equally of which Rs. r; 10,000 shall be
E paid by Mrs. Arati Dutta on 25th January, 1976 at
Silchar in presence of Shri B.K. Das, Advocate and Shri
S.K. Sen, Advocate.

3. The entire liability of the Company would be equally
shared and for that purpose an independent Auditor
shall be appointed by Shri S.K. Sen, Advocate who shall
undertake to start the accounting from the 1st week of ~.
February, 1976.

4. The shares owned by Mrs. Arati Dutta and her sons and
daughters will be sold to the Company on 25.1.76 and
G necessary permission shall be taken from Hon'ble High
Court in this regard.

5. The staff salary and gratuity of the employees of the
Head Office of the Hon'ble High Court is obtained shall
be considered as the Liability of the Company and will '
be borne by the two parties equally.
SMT. ARATI v. EASTERN TEA ESTATE [MUKHARJI, J.] 1073

6. Mrs. Arati Dutta shall have to pay another sum of A
Rs.12,500 to the Company in addition to her payment of
5% liability of the Company."

Thereafter there were differences between the parties and it
could not be adjusted as the parties could not agree as to audit. On 9th
November, 1982 the parties agreed that no auditor need be appointed B
in the matter of determination of liability and the matter of determina-
tion of liability as per the 1973 Balance-sheet should be left entirely to
the Court. In accordance with the compromise the parties were asked
to submit their Balance-sheets regarding the payments made by them
which related to liabilities in the Balance-sheet as on 31st December,
~ . .1973. The parties filed their Balance-sheets and the learned Single C
Judge of the High Court computed the liabilities of the parties on that
basis. Aggrieved, however, by the said decision, the appellant prefer-
red an appeal before the Division Bench of the said High Court. The
first question that was raised before the Division Bench was whether
the appeal lay to the Division Bench under section 483 of the Act
which dealt with appeals from orders. The said section was as follows: D

"483: Appeals from orders-Appeals from any order made
or decision given in the matter of winding up of a company
by the Court shall lie to the same Court to which, in the
same manner in which, and subject to the same conditiort~
under which, appeals lie from any other order or decision E
of the Court in cases within its ordinary jurisdiction."

It was submitted by learned counsel that though the first applica-
tion by the appellant was under sections 397 and 398 read with section
403 of the Act the same could be taken in the matter of winding up of a
company to which the reference has been made in section 483. On the F
"(--other hand, it was submitted that no appeal lay. It appears to us that
though this present application was relating to sections 397 and 398
and as it arises -in respect of the orders passed under sections 397 and
398 of the Act, the provisions of section 483 would be attracted and an
appeal would lie to the Division Bench. This conclusion seems to
follow from an analysis of the sections as interpreted by the various G
decisions of this Court as well as one judgment of the Delhi High
• --\ Court to which we will refer. However, it is sufficient for the present
purpose for us to refer to the observations of this Court in Shanta
Genevienve Pommerat & Anr. v. Papers Pvt. Ltd. & Ors. A.LR. 1983
• S.C. 269 where this Court observed that an appeal under sections 397
and 398 read with 403. of the Companies Act would lie to the same H
1074 SUPREME COURT REPORTS [ 1988] I S.C.R.

A court to which, in the same manner in which, and subject to the same ~
conditions under which the appeals lie from any order or decision of
the court in cases within its ordinary jurisdiction. This Court made the
following observations at page 269 of the report:-

"Now an order under sections 397, 398 and 403 of the
B Companies Act, on the face of it, cannot be said to be an
order made or decision given, in the matter of the winding 1'
up of a company. Relief, undoubtedly under section 397
and/or 398 is in fact an alternative to winding up. No doubt
order under sections 397 or 398 could be an order made or
decision by the High Court. Having jurisdiction under the J
Companies Act the appeal will lie to the Division Bench o( ·~~ .
c the same High Court. This is not disputed.

Chapter XLII of the Bombay High Court Rules pro-
vides for appeals to appellate Court. The Rules make pro-
vision for certain type of appeals to be placed in the first
D instance, for admission before a Bench of the High Court
to be appointed by the Chief Justice. It is not in 'dispute
that the appeal preferred by the present appellants was not
one such appeal which can be placed for admission under
Rule 966-A and it follows from this Rule that the appeals
other than those mentioned in that Rule are not to be Y f
E placed for admission. This point is no more res integra in
view of the decision of this Court in Mis Go/cha Investment
(P) Ltd. v. Shanti Chandra Bafna., (A.LR. 1970 S.C. 1350)
wherein after considering the provision contained in Rule
966-A, it was held that appeals, other than those set out in ..
-~
the Rule are not to be placed for admission and they were
F entitled to be admitted as a matter of course. This Court
accordingly quashed the order dismissing the appeal in r--4\
limine observing that the appellate court erred in summa-
rily dismissing the appeal because it was bound to entertain
the same and dispose it of on merits. This observation will
mutatis mutandis apply to the present appeal."
G
References may also be made to the decisions of this Court in
Shankarla/Aggarwal & Ors. v. S.L. Poddar& Ors., A.LR. 19655.C. f- ~
507; Mis. Go/cha Investments (P) Ltd. v. Shanti Chandra• Bafna
(supra) and M's. Tarapose & Co. v. Cochin Shipyard Ltd., A.LR.
1984 S.C. 1072. The Delhi High Court in Gokulchand D. Morarka and •
H another v. Company Law Board and others, 44 Company Cases 173
SMT. ARATI v. EASTERN TEA ESTATE [MUKHARJI, J.] 1075

'°' correctly in our opinion explained the position. There the High Court A
found that pending the petition for winding up of the company filed by
two of its creditors for failure to pay a debt in spite of statutory notice,
the Company Law Board had filed a petition under sections 397 and
398 of the Companies Act and in an application applied for interim
reliefs of removal of the sole Director and Constitution of a Board to
manage the Company. The Company Judge passed ex-parte orders B
1' restraining the Company from disposing of its assets and restraining
debenture trustees from enforcing their rights. Thereupon, an applica-
tion was filed under section 442 for stay of the petition and that peti·
tion under sections 397 and 398 was filed by 125 shareholders and a
\ Bank has also filed another winding-up petition claiming a large
-~ money. Pending the winding up petitions the Company Judge heard C
two applications together and -l?assed a common order for removal of
the sole director and constitution of~,Board of Directors with a retired
Judge as the Chairman. Appeals were taken to a Division Bench
against another order of the Company Judge. It was held over-ruling
the preliminary objections that the order passed by the Company
Judge was appealable under section 483 of the Companies Act, 1956 D
because firstly, any order passed under section 397 or section 398 was
one which was passed in lieu of winding up and hence, it was "in the
matter of winding up" and, secondly, the order passed in C.A. No. 323
of 1971 expressly fell within the scope of section 442 as the order had
'-.I been passed after at least two applications had been filed for the wind·
ing up of the Company. E

..... The Court further held that there was nothing in section 483 of
the Compaqjes Act 1956, which took away or curtailed the right of
appeal provided by section 5( 1) of the Delhi High Court Act, 1966,
and clause 10 of the Letters Patent (Punjab) as applicable to the Delhi
High Court; and that the jurisdiction conferred on the Bombay Judge F
h f the High Court under section 10 of the Companies Act was none
other than its ordinary civil jurisdiction and appeal lay also under
clause 10 of the Letters Patent to a Division Bench from the order of
the Company Judge.

In this case in the High Court of Gauhati, however, unlike the G
Bombay High Court or the Calcutta High Court or the Delhi High
_..1. Court, no Letters Patent was applicable to the Gauhati High Court. It
1 was therefore held that there was no provision for an appeal to the
judgment of the learned Single Judge of the High Ceurt. In our
'
l opinion the decision in Shankar Lal Aggarwal & Ors. v. Shankar Lal
Poddar & Ors. (supra) of this Court indicated the true position where H

\
1076 SUPREME COURT REPORTS [1988] 1 S.C.R.

A this Court held that section 202 of the Companies Act, 1913 was in pari '~
materia with the present section. This Court preferred the view of the
Chief Justice Chagla of the Bombay High Court reported in Bachharaj
Factories Ltd. v. Hirjee Mills Ltd. A.I.R. 1955 Bombay 355 to the view
expressed by the Calcuttii High Court in Madan Gopal Daga v.
Sachindra Nath Sen, A.LR. 1928 Calcutta 295 wherein it was held that
B an order or the decision made or given in the matter of winding up of a
co!11pany to be appealable had to satisfy the requirements of clause 15
of the Letters Patent. This interpretation was not accepted by other
High Courts and the Bombay High Court held differently. The view of
the Bombay High Court was preferred by this Court in the aforesaid
decision and it was observed as follows:
c "We thus agree with Chagla C.J., that the second part of
the section which refers to 'the manner' and 'the conditions
subject to which appeals may be had' merely regulates the
procedure to be followed in the presentation of the appeals
and of hearing them, the period of limitation within which
D the appeal is to be presented and the forum to which appeal
would lie and does not restrict or impair the substantive
right of appeal which has been conferred by the opening
words of that section."

In our opinion this position is clear from the observation of this Y
E Court in Shankar Lal Aggarwal & Ors. v. Shankar Lal Poddar & Ors.,
(supra) that the appeal lies to the same High Court irrespective of the
powers under the Letters Patent. Sections 397 and 398 read with sec-
tion 483 indicate that the appeal would lie in the same manner to the
same court and naturally and logically an appeal from the decision of
the Single Judge would lie to the Division Bench. This in our opinion
F follows logically from the ratio of decision of this Court in Shankarliil
Aggarwal & Ors. v. Shankarlal Poddar & Ors. (supra) as well as other---\
decisions referred hereinbefore. It is true that there is perhaps no ·
procedure to file an appeal from the decision of the learned Single
Judge of the Gauhati High Court. If that is so rules should be framed
by the High Court in its jurisdiction of Rule-making power for filing
G and disposal of such appeals. But absence of the procedural rules do
not take away a litigant's right to file such appeals when the statute
confers such a right specifically and the jurisdiction of the High Court f--
to dispose of such an appeal if so filed.

We, therefore, propose to deal with the decision of the High
H Court. Here, we are further helped by the fact that there is an appeal
SMT. ARATI v. EASTERN TEA ESTATE (MUKHARJJ, J.] 1077

~ from the decision of the learned single judge being Appeal No. 151 li A
87. In either view of the matter the view taken by the High Court is
before us. As noted, the learned single judge was asked by parties by
agreement to compute the liabilities in view of the failure of the parties
to agree to another auditor. We have heard Sree Ghosh, learned
counsel for the appellant and we have also heard Sree A.K. Sen,
learned counsel for the respondent. Sree Sen's contention was that the B
-( current liabilities came to a sum of Rs.6,65,841.63. He further submit-
ted that the parties having agreed to divide the liabilities equally, the
liability to the share of the appellant came to a sum of about Rs.3.32
lacs. As the appellant had paid a sum of Rs.1.36 lacs the contention of
( the appellant was that the appellant has to pay a further sum of Rs.2
-._A- lacs. In the alternative, it was urged by the appellant that what could C
be demanded from the appellant was the liabilities which were out-
standing and not paid off by the time the settlement had been arrived at
between the parties in January 1976. But having regard to all the
events and terms of settlement we are in agreement with the Division
Bench of the High Court that so far as the Bank liability of
Martycherra T.E. was concerned, the same had to be taken at the D
figure of Rs.2,20,000 as stated in clause (2) of the Agreement and not
at Rs.6,28,000 and odd as given in the Balance-sheet of 3 lst
December, 1973. The Division Bench computed the liability which
~ came to a total of Rs.16,34,675.46 which has computed after deducting
a sum of Rs.2,20,000 which was governed by clause (1) and it
comprised of Bank Liability. The Division Bench took into considera- E
tion that the appellant had paid a sum of Rs.1,36,038.06 after the
compromise. She had not paid anything more than this. Therefore it
follows that only a sum of Rs.6,81,299.67 was payable by the appellant
to the respondent. The Division Bench, in our opinion, correctly
modified the determination on that figure and that is the sum which
. should be the liability of the appellant. Sree Ghosh, learned counsel F
(-'for the appellant tried to submit before us that a sum of Rs.1,36,038.06
should be given credit in computing the liability of the appellant and
according to him the Division Bench fell into an error in not deducting
this liability of his client. We are unable to agree with this view. In the
aforesaid view of the matter we uphold the direction of the Division
Bench in so far as they computed the liability and direct that the G
appellant would pay that sum to the respondent in settlement of the
-\ dues referred hereinbefore.

A sum of Rs.1,36,038.06 was directed to be paid at the time of
the admission of the appeal by the Division Bench of the High Court.
If that money has been paid or realised by the respondent the appel- H
1078 SUPREME COURT REPORTS [ 1988] 1 S.C.R.
·~
A !ant would pay the balance amount of Rs.6,81,299.67 and if the money
is paid the respondent will by virtue of this order be entitled to withdraw
the same and give credit to the appellant for the same. The balance
sum will be paid by 15th March, 1988. In default of payment by that
date the amount will carry 18% interest.
B
The appeal is disposed of accordingly by so holding. Jn view of t
the aforesaid position, decision in C.A. No. 1511/87 which is from the
decision of the learned Single Judge no longer survives and is disposed
of accordingly.

SLP (C) No. 8152 of 1987 which is a cross-petition filed against )
C the decision of the Division Bench of the Gauhati High Court n6 1'- ·
longer survives and is disposed of accordingly.

Parties will pay and bear their own costs.

D N.P.V. Appeal disposed of.

y,

---
I

I