# [1964] 1 S.C.R. 717

- **Citation:** [1964] 1 S.C.R. 717
- **Court:** Supreme Court of India
- **Decided:** 1964
- **Bench:** S. J. Imam, K. SuBBA RAo, N. Rajagopala Ayyangar, J. R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1964-1-s-c-r-717-2809
- **Pages:** 26

## Headnote

Company Law-Sale-Confirmed by Company Jwl,geSet aaide by Division Bench-Administrative and judicial
ordera-Distinction-Discretion exercised by company JudgeInterference on ground that certain factors were not considered by
him-Letters Patent Appeal against order of Company JudgeWhether maintamable-Ctause 15 of Letters Patent of Calcutta
High Court-lndian Companies Act, 1913 (7 of 1913), •· 202.
Luxmi Spinning and Weaving Mills Ltd. was ordered to
be wound up compulsorily by an order of the High Court of
Calcutta on a petition of the first respondent, Shankar Lal
Poddar. Before che winding up order, the appellants instituted a rnortgage suit against the said company and Joint Re~eivers
were appo1uted by che High Court.
Later on, Joint Liquidators
were appointed in the winding up proceedings.
The Joint
Liquidators applied for directions regarding the sale of the
asseLs aud properties of the company and the Court sanctioned
the same. ,-rne sale was held after complying with the requirements of law w1th regard to advertisenlent. etc. The highest bid
of Nandlal Agarwalla was for Rs. 3,37,000/- and the bid of the
appellant firm
was Rs.3,35,000/-.
The bid of Nandlal was
accepted and he was directed to pay immediately 25% of the
bid money.
As he stated that he had not brought cash, he was
allowed to go and bring the same.
As he did not turn up
inspHe of watting for him for some time. the appellant firm was
asked to stand by their previous bid for Rs. 3,35,000/-but they
refused to du so.
The property was thrn put up for sale once
again and the highest bid of the appellant firm of Bansidhar
:O.hankarlol for Rs. 2,25,000/- was accepted.
The sale was confirmed by the C;mpany Judge.
The first respondent filed an
appeal ag•iust the order confirming the sale and his appeal was
at lowed by a Division Bench of the Calcutta High Court. The
liquidators were ordered to re-sell the propertv after due adver·
usement. The appellants came to this Court by special leave
against ~he decision of the Division Bench.
The questions for consideration before this Court were :
(!) Whether the order of the Company Judge confirming the
·1963
Jonur.ry, 24
• 718 SUPREME COURT REPORTS [1964] VOL ..
SlumkarlaJ Agg•ru:al
sale was merely an administrative -orci.,;.. passed in ·!he-_ course of
the administration of the assets of _the company. under lfquidation, and therefore not a jμdicial order subject to appeal,
(2) whether on a proper construction of s. 202 of the Indian
COmpaniesAct it was a condition fort he availability of iln appeal
~
v.
Shanlwlal P.Mar
that the· order should be open· to appeal under cl.-15 of the
Letters Patent of the Calcutta High Court and if the above were
answered in the afl'irmative whether independently of s.-202, the
- order of the Company Judge in _this case amounted to Judgment
within cl. 15 of the Letters Patent, and (3) whether the. -
appellate cotirt acted improperly . in interfering with the order
of the Company Judge. _ _
--
1 ·
'
~
.
-Held, that the order _of the Company Judge confirming the
sale was not an administrative but a judicial order. It is not
correct to say that every· order of the Court; merely for the
reason that it is passed in the course_ of the realisation of the
a!Sets of the Company, must always be treated merely as an-
- - administrative one. The question ultimatelydepends upon the
_ ·nature of the order that is passed. An order according· sanction
• to a sale undoubt•dly involves a discretion and ·cannot be.
termed merely an administrative order, for before confirming
the sale the court has to be satisfied, particularly where the confirmation is opposed, that the sale has been held in accordance
with the conditions subject to which alone the liquidator has
been p<"rmitted to effect it, and that even otherwise the sale has
been fair and has not resulted in any loss to the parties who
would ultimately have to share the realisation •.
It is not possible :o formulate a definition which would
satisfactorily disti

## Text

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i s.c.R.
SUPREME COURT REPORTS
717
SHANKARLAL AGGARWAL AND OR::i.
v;
SHANKARLAL PODDAR AND ORS.
(S. J. IMAM, K. SuBBA RAo, N. RAJAGOPALA
AYYANGAR and J. R. MUDHOLKAR, JJ.)
Company Law-Sale-Confirmed by Company Jwl,geSet aaide by Division Bench-Administrative and judicial
ordera-Distinction-Discretion exercised by company JudgeInterference on ground that certain factors were not considered by
him-Letters Patent Appeal against order of Company JudgeWhether maintamable-Ctause 15 of Letters Patent of Calcutta
High Court-lndian Companies Act, 1913 (7 of 1913), •· 202.
Luxmi Spinning and Weaving Mills Ltd. was ordered to
be wound up compulsorily by an order of the High Court of
Calcutta on a petition of the first respondent, Shankar Lal
Poddar. Before che winding up order, the appellants instituted a rnortgage suit against the said company and Joint Re~eivers
were appo1uted by che High Court.
Later on, Joint Liquidators
were appointed in the winding up proceedings.
The Joint
Liquidators applied for directions regarding the sale of the
asseLs aud properties of the company and the Court sanctioned
the same. ,-rne sale was held after complying with the requirements of law w1th regard to advertisenlent. etc. The highest bid
of Nandlal Agarwalla was for Rs. 3,37,000/- and the bid of the
appellant firm
was Rs.3,35,000/-.
The bid of Nandlal was
accepted and he was directed to pay immediately 25% of the
bid money.
As he stated that he had not brought cash, he was
allowed to go and bring the same.
As he did not turn up
inspHe of watting for him for some time. the appellant firm was
asked to stand by their previous bid for Rs. 3,35,000/-but they
refused to du so.
The property was thrn put up for sale once
again and the highest bid of the appellant firm of Bansidhar
:O.hankarlol for Rs. 2,25,000/- was accepted.
The sale was confirmed by the C;mpany Judge.
The first respondent filed an
appeal ag•iust the order confirming the sale and his appeal was
at lowed by a Division Bench of the Calcutta High Court. The
liquidators were ordered to re-sell the propertv after due adver·
usement. The appellants came to this Court by special leave
against ~he decision of the Division Bench.
The questions for consideration before this Court were :
(!) Whether the order of the Company Judge confirming the
·1963
Jonur.ry, 24
• 718 SUPREME COURT REPORTS [1964] VOL ..
SlumkarlaJ Agg•ru:al
sale was merely an administrative -orci.,;.. passed in ·!he-_ course of
the administration of the assets of _the company. under lfquidation, and therefore not a jμdicial order subject to appeal,
(2) whether on a proper construction of s. 202 of the Indian
COmpaniesAct it was a condition fort he availability of iln appeal
~
v.
Shanlwlal P.Mar
that the· order should be open· to appeal under cl.-15 of the
Letters Patent of the Calcutta High Court and if the above were
answered in the afl'irmative whether independently of s.-202, the
- order of the Company Judge in _this case amounted to Judgment
within cl. 15 of the Letters Patent, and (3) whether the. -
appellate cotirt acted improperly . in interfering with the order
of the Company Judge. _ _
--
1 ·
'
~
.
-Held, that the order _of the Company Judge confirming the
sale was not an administrative but a judicial order. It is not
correct to say that every· order of the Court; merely for the
reason that it is passed in the course_ of the realisation of the
a!Sets of the Company, must always be treated merely as an-
- - administrative one. The question ultimatelydepends upon the
_ ·nature of the order that is passed. An order according· sanction
• to a sale undoubt•dly involves a discretion and ·cannot be.
termed merely an administrative order, for before confirming
the sale the court has to be satisfied, particularly where the confirmation is opposed, that the sale has been held in accordance
with the conditions subject to which alone the liquidator has
been p<"rmitted to effect it, and that even otherwise the sale has
been fair and has not resulted in any loss to the parties who
would ultimately have to share the realisation •.
It is not possible :o formulate a definition which would
satisfactorily distinguish between an administrative and a
judicial order. That the power is entrusted to or wielded by a·
. person whO functions as a court i~ not decisive . Of the question.
·whether· the act or decioion is adminis•.rative or _judi9ial. An
administrative order would be one whi:h is directed to the
regulation or supervision of matters as distinguished from ati
orde1 which dedctes the ri~hts of parties or confers or refuses to
conf'T rightsto propertv which are the. sunject of adjudic1tion
before the court. One of the tests.would be whether a matter
which involv ... the exercise of discretion is left for the ·decision
- .of the authority, particularly if that authoi'ty. were a court, and
if the discretion has to be exercised on objective, as , distinguished from a purely subjective consideration, it would be a
judicial decision.
It- has sometimes been said that the essence
of a judicial prcY-ceding or of a judicial __ order _is that thore
would be two parties and a Zia brtween them which is the
subject of adjudication, as a ,esult of that ot'der 9r a decision on
an issue between a proposal and an opposition._ Nodo μht it
1 S.C.R.
SUPREME COURT REPORTS
719
would not be possible to describe an order passed deciding a lia
1963
before the authority that is not a judicial order but it does not
Shanl<arlal Aggarwol
follow that the absence of a lia necessarily negatives the order
v.
being judicial. Even viewed from this narrow standpoint, it is
Sha'lkarlal Podd!4'
possible to hold that there was a lis before the Company Judge
which he decided by passing the order. On the one hand were
the claims of the highest bidder who put forward the contention
that he had satisfied the requirements laid down for the· acceptance of his bid and was consequently entitled to have the sale
in his favour confirmed, particularly so as he was supported in
this behalf by the Official Liquidators. On the other hand,
there was the first respondent and the large body of unsecured
creditors whose interests, even if they were not represented by
the first respondent, the court was bound to protect. If the
sale of which confirmation was sought was characterised by any
deviation from the conditions subject to which the sale was
directed to be held or even otherwise was for a gross undervalue
in the sense that very much more could reasonably be
expected to be obtained if the sale were proper\y held, in
view of the figure of Rs. 3,37.000/- which had been bid by
Nandlal Ag-arwalla it would be the duty of the court to refuse
the confirmation in the interests of the general body of <Teditors, and this was the submission .made by the first respondent,
There were thus two points of view presented to the court hy
two contending parties or interests and the court was called
upon to decide between them, and the decision vitally affected
the rights of the parties to property
Under the circumstanres,
the order of ~he Company fudge was a judicial order and not
administrative cne. and was therefore not inherently incarable
of being brought up it. ;ppeal.
·
H•ld, also, that Letters Patent Appeal was competent.
The second part of s. 202 of the Indian
Companies Act
which refers to ccthe manner" and "the ('Ondition subject to
which appeals may be had" merely regulates the procedure to
be followed in the presentation of appeals and of hearing them,
the period of limitation within which the appeal is to be
presented and the forum to which the appeal would lie and
does not restrict or impair the substantive right of appeal which
has been conferred by the openine; words of s. 202.
The words
"order or decision" occurring in the firsr Part ofs. 202, thou~h
wide, would exclude merely' procedural orders or those which do
not afFet t the ri~hts or liabilities of parties.
Held, also that the appellate courr did not <Ct improperly
in interfering with the order of the Company Judge
The
Company Tudge did not take into consideration the fact that
certain hidders had left at the time when the property was put
1963
SAIJl!karlal Aggarwal
v,
Sllanlart.l PoJdar
720
SUPREME COURT REPORTS [1964] VOL.
up for auction once again. The Judges of the Division Bench
were justified in considering that the sale to the appellants
ought not t,o have been confirmed.
Madan Gopal Daga v. Sachindra Nalh Sen (1927) I. L. R.
55 Cal. 262, reversed.
Bachharaj Facloriea Ltd. v. The Hiraji Mills Lid .. I. L. R.
(1955) Born. 550 and Wesl<rn India Theatres Ltd. v. Ishwarbhai
Somabhai Patel, I. L. R. ( 1959) Born. 295, approved.
Asrumati Debi v. Kumar Rupendra Deb Raikot (1953)
S. C.R. 1159 and State of Uttar Pradesh v. Dr. Vijay Anand
Maharaj [1963] I S.C.R. I referred to.
CrvrL APPELLATE ju1nso1cT10N : Civil Appeal
No. 214 of 1960.
Appeal by special leave from the judgment and
order dated December 11, 1958, of the Calcutta High
Court in Appeal from
Original Order No. 176
of 19;,5,
S. T. Desai, Himmatsinghl.:a and B. P. Maheshwari, for the appellants.
N. G. Chatterjee, B. M. BagaruJ, M. V. Goswami for B. G. Misra, for respondent No. I.
1963. January 24. The Judgment of the Court
was delivered by
AYYANGAR, J.-The principal point
raised
for consideration i,n this appeal by special leave
relates to the correctness
and
legality of
an
order by a
Division Bench of Calcutta High
Court refu;ing to confirm a sale by the licp1idators
of the assets
of a company which
is
being
wound up.
The company in question-the Luxmi
Spinning & \\leaving 1'.lills Ltd.-a company incorporated under the Indian Companies Act-was carry·
ing on business at Calcutta.
On a petition of the
1st
resp(•ndent-Shankarlal Poddar-made to the
1 S.C.R.
SUPREME COURT REPORTS
721
High Court of Calcutta, this company was ordered to
be wound np compulsorily by order dated August 22,
l\l55.
Bul before this order was passed, certain
matters had transpired to which it is necessary to
advert. The appellants claiming that they had
advanced loans to the company under two registered
deeds of mortgage and alleging that there had been
default on the part of the company in performing
its obligations as to payment of interest etc. under
the said deeds instituted a mortgage snit in the High
Court of Calcutta for the usual reliefs under 0. 34,
Civil Procedure Code.
Pending the disposal of the
suit they moved the Court for the appointment of a
receiver, and the 'ccond appellant ;md the Managing
Director of the company were appointed Joint recei ·
vers and they took possession of the assets of the
company.
By reason of this circumstance, when the order
for winding up was passed in August, 1955 though
the Official Receiver was appointed as Official
Liquidator, still he was directed not lo interfere
with the possession of the.Joint Receivers.
Sub~cquen
tly by a fnrlhcr order dated September 8, l 955 two
independent persons who are respondents 2 &
3
before us were appointed as Joint Receivers in the
suit and they were also directed to function as Joint
Liquidators in the winding up proceedings.
The Joint Liquidators applied for directions
to the Court as regards the sale of the assets and
properties of the company and the Court by an order
dated December 20, 1955 directed their sale by public auction after due advertisement in the manner
set out in the order and notice of this sale was directed
to be given to the appeHants who had by that date
obtained a mortgage decree in their suit.
At this
stage it is necessary to mention that in the winding
up proceedings the validity of the appellants' claim
as creditors and as secured creditors is challenged,
1963
Sh.nkarlal At:arwcl
••
Sh4nkarl•l 'P(JJJ1.r
1963
Shmarlol Au111"'ol
' •.
Sllalr"W Pt<ldllr
.4.1).r7fga, /.
,22
SUPREME COURT REPORTS [1964] VOL.
and a claim by the State of West Bengal to arrears
of certain taxes in regard to which
priority is
claimed is also pending adjudication by the Comp Illy
Judge .
In pursuance of the aforesaid directions of the
Court dated December 20, 1955 the liquidators held
certain auctions to which it is unnecessary to refer
since these proved infructuous, but ultimately the
appellants and others agreed to have the sale of the
assets to be held free of all charges and encumbrances
and to their claims to security o\/er the properties
being transferred to the sale·proceeds when
paid
into Court. Consequent on this agreement the Court
made an order on July 10, 1956 by which the.Joint
Liquidators were directed to sell the properties free
of all encumbrances, the sale proceeds re~ lised being
held in Court to answer the claims nf rhe creditors
according to such priorities as mi~ht he determined
by the Court.
The sale by public auction thus directed was
duly advertised to be held on September 8, l!J56 at
2 p.m. The conditions subject to which the proper·
tics were to be sold which were approved by the
Court included, inter alia, (l) that the sale was
subject to a reserve price to be determined by a valuer
and surveyor which however was not to be made
known to the bidders but had to be kept in a sealed
cover until the bidding was over, (<!) the sale was
subject to confirmation by the Court, (3) that it
was in the discretion of the liquidators to accept or
reject any bid, (4) as far as possible the highest bid
was to be accepted provided the liquidators considered
that the bid was for a sufficient amount, (5) immediately on acceptance of the bid by the liquidators the
bidder was required to deposit 25 per cent of tht
amount of the bid in cash "in default whereof the
liquidators were at liberty to put up the property
again for sale", (6) the purchaser was to pay the
i S.C.R. SUPREME cotr.R T REPOR ts
723
. .
balance of purchase moneys within two weeks from
the date of confirmation by the Court.
The sale was held as advertised. There were
in all 36 b"ids for lot No. 1 which consisted of the
business and properties of the company starting with
a bid for Rs. 1,50,000/· from 8 bidders including
the 1st appellant who himself personally bid for
Rs. 3,00,000/-. Thereafter there was keen competition between one Nandlal Agarwalla and the ap-.
pellant firm of Bansidhar Shankarlal and after
successive bids by these two the highest bid reached
was that by Nandlal
Agarwalla who
bid for
Rs. 3,37,000/·, the penultimate bid of the appellantfirm being Rs. 3,35,00U/-.
No further bids were
offered and thereupon the Joint Liquidators accepted
the bid of Nan~Ual and he ,was tlirected to pay imme'.
diately Rs. 84,250/- this being 25% of his bid,moI'!ey.
This bidder, however, stated that he had not brought
the cash and then the Receivers offered to take instead
a cheque from his solicitors," if he so desired, but
this also the bidder declined and thereafter Nandlal
Agarwalla left the .place giving the impression on
those there, including the Joint Liquidators that he
had gone to bring the money.
The liquidators
waited ~ror· a.bout 20 minutes but as he did not
turn up they again put up the property for sale.
Before doing so, however, they-the liquidatorsenquired of the appellants whether they would
stand by their previous bid for Rs. 3,35,000/-
in which case they were informed that theirs would
be treated as the highest bid. They would not agree
and thereupon the. liquidators put the property to
auction
again and the starting bid was by the
appellant firm of Bansidhar Shankarlal who, as stated
earlier, had,
at the former
bidding,
offered
Rs. 3,35,000/- now starting the bid with Rs. 1,50,000/-
and after 8 more bids there were no further bids
beyond Bansidhars' for Rs. 2,25,000/-.
This bid was
accepted . by the official liquidators . subject to
1963
Slu111karlal Azgarwal
v.
Shankarlal Podiar
AY.)'ango1, J.
, .
. ---,~.' ,..- -....
'
) ' ./
-
724 ·-SUPREME cocJRt Rtl'OR.fs [i964] Vot.
- 1953
,_
Slian11rlal .Ag:sru·.J
confirmation by the Court after-they --ascertained
by opening the sealed cover received from the valuer·
that this amount was not below the· price for which
the property could be sold. Immediately on the acce·
·v.
Sh.nkarl•l PodJar
ptance being intimated Bansidhar paid the amount
required to be paid by the conditions of the sale •.
. _ · The liquidators took out a Master's summons
-. on September 11, 1956 stating these facts and prayed
for an order from the Company Judge that the sale
be confirmed or such other directions be given as the
Court may deem fit and proper. The summons was
opposed by the 1st respondent and the main point
urged by him was that when Nandlal • Agarwalla's
bid was accepted by the Joint Liquidators, several .
other5 who had come to bid for the property left the
auction room unc:ler the impression--that that -sale was
goi11g through and that .the sub.sequent
~ale at_ which ·
the 'appellant was the highest b1ddrr was_ not such as
could be confirmed by the Court; '!he summons was
heard by the Company Judge-l'.B. Mukharji, ].-..
ang the learned Jud~e passed an order acceding to
the prayer of the hqmdators to confirm the sale.·
Thereupon the !st respondent filed an appeal against
the order confirming the sale and also applied for
. the stay of d!=livery of possession of the properties of
the company to the appellant. In . the application -
for stay the appellate court passed an order in these
terms:
"On Bansidhar Shankarlal giving an under- .
taking to this Court to purchase the property
for Rs. 3,35,000/- should the appeal be allowed
and on Bansidhar Shankarlal · depositing with
their. Solicitors Rs. 16,000/· to be held by the
Solicitors free from lien and subject to further
order of this Court to abide by the result of the
suit challenging the mortgage in favour of - -
Bansidhar Shankarlal, there will be no further
orders in this
application and
Bansidhar
.
-.
'
I S.C.R.
SUPREME COURT REPORTS
725
Shankarlal will be entitled to posses,ion of the
factory and its assets on a sum of l\s. Jli,000/-
being deposited with their Solicitors."
There were a few more directions made by the Court
to which however it is unnecessary to refer.
The appeal
was
allowed
and the order
confirming the sale was set aside <.1nd the liquidators
were directed to resell the
property
aticr due
advertisement. It is from this
decision of the
Division Bench that this appeal has bern preferred
by special leave.
Learned Counsel for the appella11ts urged before
us the following points :
(1) The sale by auction by the Joint Liquidators effected after obtaining the sanction of the
Court on December 20, 19fi5 under s. 178 (c) of the
Indian Companies Act, HJ13 was merely an act
performed by them in the course of their administration of the ass<.1ts of the company and the action
of the Judge in confirming such sale also partook of
the nature of an administrative act, and not being a
judicial order no appeal lay against it.
(2) Even if the order of the Company Judge
was a judicial order, still it was not a judgment
within cl. 15 of the Letters Patent of the Calcutta
High Court and so no appeal lay to the Division
Bench.
(3) No doubt, s. 202 of the Indian Companies
Act permits appeals against orders and decisions in
the course of a winding up but that provision is of
no avail, because for an order to be appealablc
under s. 202, it has, in the case of an order of a
Single Judge of the High Court, to satisfy
the
requirements of cl. 15 of the Letters Patent.
1963
.f.h mk111lal Aggarwol
v.
Shankarlal Fotlda;
4Yyongar, J.
1963
Sla.M.rl•l Au.uw•l
..
SA.w•lal Poiiar
726
SUPREME COURT REPORTS [1964) VOL·
(4) Even if the order of Mukharji, J., was a
jud;cial order capable of appeal,
still it was a
discretionary order and cou Id not be interfered with
by an appellate court merely because they considered
that it was not a correct order to pass.
In the light of these submissions the questions
to be considered are : (1) whether the order of the
Company Judge confirming the sale was merely an
administrative order passed in the
course of the
administration of the assets of the company under
liquidation and therefore not a judicial order subject
to appeal, (2) (a) whether on a proper construction
of s. 202 of the Indian Companies Act it was a
condition for the availability of an appeal that the
order should be open to appeal under cl. 15 of the
Letters Patent of the High Court,
(b) If the above
were answered in the ;ifnrmative, whether independently of s. 20:? the order of the Company Judge
in this case amounted to a judgment within cl. I ii of
the Letters Patent, and (:l) whether the appellate
court acted improperly in interfering with the order
of the learned Company Judge.
We shall deal with these points in that order.
( 1) First as to the scheme of the relevant provisions
undtr the Companies Act. Section 179 of the
Companies Act, l!J I 3 specifies the powers of the
official liquidator. It enacts, to quote only the words
material for the present appeal :
"17!J.
Powers of Official
liquidator.
The
official liquidator shall have power, with the
sanction of the Court, to do the following
things :-
(a) ..................................................... .
(b)
···················••·····•·•······•······•··········•
l S.C.R.
SUPREME COURT REPORTS
727
(c) to sell the
immovable
and
movable
property of the company by public auction
or private contract, with power to transfer
the whole
thereof to any
person or
company, or to sell the same in parcels;
'I hough s. 180 which reads :
"180. Discretion of official liquidator.-The
Court m11y provide by any order that the
official liquidator may exercise any of the above
powers without the sanction or intervention of
the Court,. ........ "
makes provision for eliminating the need for the
sanction c.f the Court required for action by the
official liquidator under s. 179, as such a' power was
not exercised in this case this section may be left out
of account.
Section 183 of the Act makes provision
for t'ie exercise of control by the Court over the
liquidator and sub-s. (3) enables the official liquidator
to apply to the Coun for directions in relation to
any particular matter arising in the winding up.
Section 18! of the Act requires the
Court to
cause the a3sets of the company to be collected and
applied in discharge of its liabilities.
On the basis of
these provisions, we shall
proceed to consider whether the confirmation of the
sale was merely an order in the course of administration and not a judicial order. The sale by the liquidator was, of course, effected in the course of the realisation of the assets of the company and for the purpose
· of the amount realised being applied towards the
discharge of the liabilities and the surplus to be
distributed in the manner provided by the Act. It
would also be correct to say that when a liquidator
effects a sale he is not discharging any judicial
function.
Still it does not follow that every order
1963
Slumk.irlal Aftatw•I
v.
ShankaTl•l P..Jiar
, Shank4rllll .tf::•rw&l
v.
Shank4Tlsl
P~1dar
Ayytmgar, J.
-
-
728 SUPREME COURT REPORTS (1964] VOL.
of the Court, merely for the reason that it is passed
in the course of the realisation of the assets of the
company must always be treated as
merely an ·
administrative one._ . The question ultimately depends
upon the nature of the ·order -that is passed.
An
order according sanction to a.sale undoubtedly involves a discretion and cannot be termed merely a
ministerial order, for before confirming the sale the
· Court has to- be satisfied, particularly where the
-confirmation -is opposed, that the sale has been held
in ·accordance with the conditions subject to which
alone the liquidator has been permitted to effect it,
· and that even otherwise the sale ha.s been fair and
has not resulted in any loss. to the parties who would ·
ultimately have to share the realisation.,
- - - '...._
.
The _next· question is whether such an order
could be classified as an administrative order. One
thing is clear, -that the mere fact that -the order is
passed in the course of the administration of the
assets of the company and for realising those assets is·
not by itself sufficient to -make it an administrative,
as distinguished from a judicial, order. For instance,
_ the determination o[ amounts due to the company _
from its debtors which is also part of the process of -
the realisatic-n of the assets of. the company is a
matter which arises in the course of the administra- '
tion. · It- does· not on that account follow that the
· determination of the particular amount due from a
debtor who is · brought before the Court is an administrative order.
It is perhaps not possible to formulate a
definition which would satisfactorily distinguish, in
this context, between ·an administrative and ajudicial order. That the power is entrusted to or wielded
by a person who functions .as a Court is not decisive
of the question whether the Act or decision is administrative or judicial. "But we conceive that an
administrative orc;ler would be one which is directed
l S.C.R.
SUPREME COURT REPORTS
729
'· to the regulation or supervision of matters as distin·
guished from an order which decides the rights of
parties or confers or refuses to confer rights to
property which are the subject of adjudication before
the Court. One of the tests would be whether a
.matter which involves the .exercise of discretion is
left for the decision of the authority, particularly if
that authority were a Cuurt, arid if the discretion has
to be exercised on objective, as distinguished from a
purely subjective, __ consideration, it . would be a
judicial decision. It has sometimes been said that
the essence of a judicial proceeding or of a judicial
· order is ·that there should be two parties and a lis
between them which is the subject of adjudication,
as a result of that order or a decision on an issue
between a proposal and an opposition.
No doubt, it
would not be possible to. describe an order passed
deciding a lis before the authority, that it is not a
judicial order but it does ·_not follow -that the
ab•ence of a
lis · necessarily
negatives
the
order
being judicial. · Even
viewed from . this
. narrow standpoint it is possible to. hold that' there
· was a lis l:iefore the Company Judge which he decided
by passing· the order. .On the one hand were the
claims of the highest· bidder who put forward the
contention that he had satisfied the· requirements laid
down for the acceptance of hi3 bid and was cons·
equently entitled to have the sale in his favour ·
confirmed,· particularly so as he was supported in
this behalf by the official liquidators. On the other
hand there was the 1st respondent and not to speak
of him, the large body of unsecured creditors whose
interests, . even if they were not represented by the
1st respondent, the Court was bound to protect. If
the sale of which · confirmation was sought was
characterised by · any deviation from the conditions
subject to which the sale was directed to be held or
· even otherwise was for a gross undervalue in .the sense
that very much more could reasonably be expected
to be obtained if the sale were properly held, in view
1963
Shanl;ar/lll .lt:arw•l
'
v.
Shankarlal PodJar
1963
Sr:,;·,J..rlal Agt•'wel
..
Sh•nk4rlal Ptxldcr
730
SUPREME COURT REPORTS [1964] VOL.
of the figure of Rs. 3,37 ,000/- which had been bid by
Nandlal Agarwalla, it would be the duty of the
Court to refuse the confirmation in the interrsts of
the. g<-ncral body of creditors and this 1rns the submission made by the 1st respondent.
There were
thus two points of view presented to the Court by
two contending parties or interests and the Court was
called upon to decide between them.
And the decision vitally affected the rights of the parties to property.
In this view we are clearly of the opinion
that the order of the Court was, in the circumstances,
a judicial order and not an administrative one and
was therefore not inherently incapable of being
brought up in appeal.
(2) The next point for consideration is whether
even if this was a judicial order no appeal lay from
it under s. 10~ of the Indian Companies Act unless
the order amounted to a judgment within cl. 15 of
the l.<'ft<'rs
!'~tent of the Calcutta High Court.
Section :.:u~ runs as fullows :
"202. Appeals from orders.-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
manner 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."
It was submitted that assuming the order of the
Company Judge was "an order or decision made or
given in the matter of the winding up of a company
by the Court" the last words of the section "subject
to the same r.onditions in and subject to which appeals
may be had from any order or decision of the same
Court in cases within its ordinary jurisdiction" restricted the right of appeal conferred by the lst limb of the
section to those which might be preferred under cl. 15
of the Letters Patent in the case of a judgment of a
t
I S.C.R.
SUPREME COURT REPORTS
731
Single .Judge of the High Court.
Io support of this
submission learned Counsel relied on the decision of
the Calcutta High Court in JJJndrm Gopal Da(fa v.
Sachindra Nath Sen('). It was there held that an
order made in the winding up of a company by a
Single.Judge of a High Court in order to be appealable under s. 202 must satisfy the requirements of
cl. 15 oi the Letters Patent, viz., that it must be "a
judgment" within
the meaning of that clause.
C. C. Ghose, J. rejected the construction that the
words "same manner and subject to the same condi:
tions" occurring in s. 202 were merely a reference to
the procedure to be observed as regards the manner
of filing an appeal or the forum to which the appeal
lay and not the substantive right to prefer an appeal.
Buckland, J. who agreed with Chose, J. considered
that though the word "manner'' might refer to the
procedure for filing an appeal, the word "conditions"
could not be given any such limited meaning but
would import a reference to the limitation on the
right to appeal itself as laid clown in cl. ~5 of the
Letters Patent wher.e the order appealed from was
that of a Judge of the High Coi;rt.
It must be
mentioned that in the appeal now before us the
objection that no appeal lay from tbe order of
Mukherji, J. was raised before the Bench, but the
learned .Judges rejected it on the ground that the
order of the learned Judge was "a judgment" within cl. 15 of the Letters Patent and so appealable
under that provision.
This interpretation of the scope of s. 202 of
the Companies Act has not been accepted by several
other High Courts.
The leading case in support of
the other view is Rachhruaj Factories Ltd. v. Tlie
Jliraji !]fills Ltd.('). The learned Judges were dealing
with an appeal against an order of the Company judge
adjourning a petition for winding up in order to enable
certain shareholders to -file a suit for a declaration
that certain debentures were not valid in law. '!'he
(I) (1927) J.L,R. 55 Cal. 262.
(2) J.L.R; (1955) Dom. 550,
1968
Slzank.rlRl J:earwal
v.
Shankarla/
Podd«r
1963
Shoniaf/al A11aru.-al
v.
Shant.•141 Poddar
732 SUPREME COURT REPORTS [1964] YOL.
Company Judge made the order under s. 170 of thl'
Companies Act which provides that on hearing a
petition for winding up the Court may dismiss 01
adjourn the hearing conditionally or unconditionally
or make any
intcri111
order etc.
A preliminary
objection was taken to the hearir.g of the appeal on
the ground that the order from which the appeal
was preferred was not a judgment within the meaning
of cl. 15 of the Letters Patent and therefore no appeal
lay. It was urged that under s. :?O:? the right of
appeal conferred was subject to "the same conditions"
to which appeals might be had from the decision of
the Court in cases within its ordinary jmisdiction and
since the said condition was not fulfilled the appeal
was incompetent. Chagla, C. J. repelled this cont en·
tion and pointed out that the Courts which dealt "ith
winding up petitions and to what;e orders s. :!0:!
applied were not m~r~ly the High Courts Lut alsn
the District Courts. If the construction of the section
on whose correctness the preliminary objection was
based were upheld it would mean that in tlie case of
an order made by a District Court the appealability
of that order would be depenclcnt on its satisfying the
conditions of arpeal for "decisio11s" laid down under
the Civil Procedure Code.
l!nder the Code "crders
or decisions" are classified into two heads-decrees
and orders.
Whereas an appeal lies by virtue of
s. 96 of the Code against every decree which is defined
ins. :? of the Code, only certain typl's of orders under
particular provisions of the Code which arc listed in
s. 104 are capable of appeal and none others.
It was
not in dispute that very few of the orders passed in a
winding up would amount to decrees within the Code.
There was no doubt either that most of the orders or
decisions in winding up would not be comprehended
within the class of appealable orders specified in
s. 104 or 0. 43. r.l. If therefore the contention of the
respondent were accepted it would mean that in the
case of orders p<.: :ed by the Distric.t Courts appeals
would lie only ag;.;nst what would be decrees under
I S.C.R.
SUPREME COURT REPORTS
733
the Code as well as appealable orders under s. 104 and
0.43. r.l and very few of the orders passed in the
Courts of the winding up would fall within these categories. On the other hand, the expression "j udgment" used in cl.15 is wider. The karued Judge pointed out that the position would therefore be that a
decision rendered or an order passed by a District Court
would not be appealable because the conditions laid
down by the Civil Procedure Code were not satisfied,
yet an exactly identical order or decision by the judge
of the High Court would be appealable because it
might constitute a judgment within cl.15. The
learned J udgc therefore rejected a construction which
would have meant that the same orders passed by
District Courts and by a Single Judge of a High
Court wauld be subject to different rules as to
appealability. The learned Judge observed that the
right of appeal was conferred by the 1st limb of
s. 202 and 1hat the second limb merely. dealt with
the procedural limitations of that appeal. He further
pointed out that the expression "order or decision"
used in s. 202 itself· indicated that the order or
decision .was not merely procedural in character but
that which affected the rights and liabilities of
parties. The learned Judge referred to t:1e decisions
in Jliadan Gopal Daga v. Sachindra Nath Sen (1), and
the cases following it. and expressed his dissent with
the reasoning which found favour with the Judges of
the Calcutta High Court. The decision in Hachlwraj
Factories Ltd. (') was later followed by the same
Court in Western India Theatres Ltd. v. Ishwarbhni
Somabhai Patel ('). We find ourselves in agreement
with the view here expressed. 11!/adan Gopal Daga (' ),
proceeds wholly on the meaning which could be
attributed tu the word "conditions" in the expression
"subject to the conditions" occurring in s.202 and
does not take into account the context in which
s. 202 was designed to operate and particularly the
fact that more than one grade of Court each governed
by different ru !es as to the nature of the decision
(I) (1927) J.L.R. 55 Cal. 262.
(2) I.L.R. (1955) Born, 550.
(S) I.L,R. (1959) Born. 295.
1963
Shar.karlal Aggar1<al
v.
,\'/uJnkt1rlal Poddar
Ay,angar, J.
'
I
.- - ......
\
;
I
/
734 SUPREME couR.t REPORTS [i964J \rot.
which would enable an· appeal .to be preferred could
S!umktulal Aggarwal be vested with jurisdiction under the Act. When by
v.
the proviso to s.3 of the Indian Companies Act,
' .. 1963
Shankarlql Poddar
•
l!) l.3 the Indian ·Legislature enabled jurisdiction
.. ~yyangar, J.
to be vested in District Courts· so as to be· constituted the "Court having jurisdiction under the Act",
knowledge must be imparted to it that the District
Courts and the High Courts functioned under different
statutory. provisions as regards rights oC appeal from
their orders and decisions. Besides, it would also be
fair to presume that they intended to prescribe a
uniform law as regards the substantive right of
appeal conferred by s. 202. It could not therefore . ·
be that an identical order if passed by one class of
· .. "court having jurisdiction under the Act" would be
·.final,. but that if passed by another Court vested
with identical powers and jurisdiction would be
subject to an appeal.
. - -
.• - ·-
.
There is also one another aspect from which the
problem could be viewed.
Takin~ first the provisions of the Civil Procedure Code which would
govern the orders passed _by District Courts; it would
be seen that apart from "decrees" which are appealable · by reason of s. !J6 of the Code, "orders" are
appealable in accordance with s. 104. That sect.io.n
.after. enumerating certain orders which- are made
appealable, contains a residuary clause (i) copferring
a right of appeal in respect of "any order made
under rules from which an appeal is expressly allowed
by rules"-and the rule referred to is 0. 43. r. I. Now
. under s. 122 of the Code each of the High Courts
is vested with power "to make rules, to annul, alter
or add to all 01 any of the rules in the 1st Schedule".
In exercise of this power High Courts have in respect
of the Civil Courts subject to their appellate jurisdiction made alterations and additions in the rules
including those in 0.43.r.l, either extending or restricting the right of appeal · conferred by the Code as
originally enacted. The_ question that arises on this
1 S.C.R.
SUPREME COURT REPORTS
735
state of circumstances is whether the legislature, when
it enacted s. 202 of the Companies Act, intended
that the righi of appeal should vary from State to
State depe!!ding on the particular rule in force in that
State by reason of the exercise by the High Court
of its power under s. 122,
Civil Procedure Code.
The anomaly created by the constructi•'!H urged
by learned Counsel . for the appellant does not stop
here. Even taking the case of the High Courts themselves, the construction of the word 'con<lition' as
including the appealability of the decision "°''"Id lead
to
ra~her strange results.
The relevant ;vords of
s. :!02 are :
"Subject to the same conditions ...... lo which
appeals may be had from any order or decision
of the same Court in cases within its ordinary
_i\Jrisdiction "-"ordinary j uriscliction" and not
"ordinary original jurisdiction."
The question that would arise is as to what is meant
by "ordinary jurisdiction" of the Court.
l'lainly the
words would only exclude jurisdiction vested in the
Court by special statutes as distingu;shed from the
statutes constituting the Court. Undoubtecily; in the
case of?. High Court the limits of whose jurisdiction
arc governed by its Letters Patent, the Letters Patent
would determine what the "ordinary jurisdiction" is.
But that Letters Patent is not immutable and has
been the S>Jbject of several alterations.
Thus when
the Companies Act was passed in l!ll 3, an appeal
lay from every "judgment" of a Single Judge of the
High Court.
But in March 19l!J it was amended so
as to exclude the right~ of appeal from judgment
passed in exercise of revisional jurisdiction and in
exercise of the power of superintendence under s. )07
of the Government of India Act, .UH5.
There can
be no doubt either that the exercise of revision~ 1 or
supervisory jurisdiction is as much "ordinary jurisdiction" of the High Court as its original or appellato
196_~
Shankarlal Ag:u; .ual
v.
ShtJnkarlal Pc:: far
Ayyangar, J.
736
SUPREME COURT REPORTS (1964] VOL.
1963
jurisdiction and it cannot be that there has been any
s, .. ,.,w All0tw•I a Iteration in the law as regards the appealability of
v.
. dcrisicr.s of a High Court under s.