# Thakur Amar Singhji v. 'State of Rajasth•n Venkataram•

- **Citation:** [1955] 2 S.C.R. 374
- **Court:** Supreme Court of India
- **Decided:** 1955
- **Case number:** writs will issue in these three petitions. In Petition No. 468 of 1954
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/thakur-amar-singhji-v-state-of-rajasth-n-venkataram-1496
- **Pages:** 18

## Headnote

1955
Thakur Amar
Singhji
v.
'State of Rajasth•n
Venkataram•
Ayyar J.
1955
April 20
374
SUPREME COURT REPORTS
[1955]
properties are
within the exemption enacted
in section 20.
To sum up: The impugned Act is not open to attack either on the ground that the Rajpramukh had
no legislative competence to enact it, or that the
pr<>-
cedure prescribed
in
article 212-A for
enactment of
laws had not been followed. The Act is, in substance,
one for acquisition
of
property,
and
is within
the
legislatiYc competence of the State, and it is protected
by article 31-A.
But the notification is bad as regards
properties
comprised
in Petitions
Nos. 392
and 488
of 1954,
as izoras are not within the impugned Act.
The properties mentioned in Petition No: 36 of 1955
are declicatcJ for religious services,
and
are
exempt
tmdcr section
20 of the Act.
Appropriate writs will
issue in these three petitions.
In Petition No. 468 of 1954 the right of the peritioner to c!oim cxem ption under section
20
for
the
villa!ic of Jorpur:1 on the ground that it is dedicated
for worship of the Deity is reserved, and the petition
is otiH~r\vise dis1nis.sed.
All the other !JCt1t1ons will stand dismissed.
The
parties wiil b(ar their own costs m ali the petitions.
C\f. K. RANGANATHAN AND ANOTHER
ti.
GOVERNMENT OF MADRAS AND OTHERS.
[S. R. DAs, RHAC'NATJ and SJNHA JJ.]
Indian Companies Act, (Act VII of 1913), s. 232(1) as amended
by Act XXll oj l936-'F/1e iuords "or any sale held without leave of
the Court of any of the propc;·tit"-·s of the Co1npa11y" added in the section-FVhethcr lef!islaturc intended to 1nake alteration
£n the !atu as
respects sales effected by secured creditor-Secured creditor-TVhcther
ouiside the toinding up--Construction_:Presumption against
i111plied
r1fteratict1 of law.
The secured creditor is outside the winding up and can realise
his securir:v \vithout the ieave of the winding up Court, though if he
files a suit or takes other legal proceedings for the realisation of his
security he is bound under s. 171 of the Indian Companies Act to
obtain the leave of the winding up Court before he can do so although
such leave \V1uld alinost automatically be granted.
2S.C.R.
SUPREME COURT REPORTS
375
It is a legitimate rule of construction to construe words in an
Act oi Parliament with reference to words found in immediate connection with them. It is also a well-recognized rule of construction
that the legisbture does
not intend to make a substantial alteration
in the law beyond what it explicitly declares either in express words
or by ckar implication and that the general words of the Act are
not to be so construed as to alter the previous policy of the law, unless no sense or meani'1g can be applied to those words consistently
with the intention of. p:eserving the existing policy untouched.
Held therefore that having regard to the context in which the
words "any sale
held without leave of the Court of any of the properties" added in s. 232( 1) bv the amending Act XXII of 1936 have
been used in juxtapos;tion witn "any attachment, distress or execution put into force without leave of the Court against the estate
or
effects" it would be a icgitimate construction to be put upon them
that they refer only to sales held through the intervention of
the
Court and not to sales effected by the secured
creditor outside the
winding up and without the intervention of the Court, and that the
amendment was not intended to bring within the >Weep of the general
words saks effected by the secured creditor outside the winding up.
Held accordingly that in the present case the sale effected by
respondent No. 2 as the receiwr of the trustees of the
debentureholders in July 1954 was valid and binding on all parties concerned
and could not be challenged as it was sought to be
done by the
Official Receiver.
Food Controller v. Cork (1923 A.C. 647), Kayastha Training and
Banking Corporation Ltd. v. Sat
Narain Singh (f 1921] I.L.R. 43
All. 433), Baldeo Narain Sfrigh
v. The United
India Ba

## Text

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1955
Thakur Amar
Singhji
v.
'State of Rajasth•n
Venkataram•
Ayyar J.
1955
April 20
374
SUPREME COURT REPORTS
[1955]
properties are
within the exemption enacted
in section 20.
To sum up: The impugned Act is not open to attack either on the ground that the Rajpramukh had
no legislative competence to enact it, or that the
pr<>-
cedure prescribed
in
article 212-A for
enactment of
laws had not been followed. The Act is, in substance,
one for acquisition
of
property,
and
is within
the
legislatiYc competence of the State, and it is protected
by article 31-A.
But the notification is bad as regards
properties
comprised
in Petitions
Nos. 392
and 488
of 1954,
as izoras are not within the impugned Act.
The properties mentioned in Petition No: 36 of 1955
are declicatcJ for religious services,
and
are
exempt
tmdcr section
20 of the Act.
Appropriate writs will
issue in these three petitions.
In Petition No. 468 of 1954 the right of the peritioner to c!oim cxem ption under section
20
for
the
villa!ic of Jorpur:1 on the ground that it is dedicated
for worship of the Deity is reserved, and the petition
is otiH~r\vise dis1nis.sed.
All the other !JCt1t1ons will stand dismissed.
The
parties wiil b(ar their own costs m ali the petitions.
C\f. K. RANGANATHAN AND ANOTHER
ti.
GOVERNMENT OF MADRAS AND OTHERS.
[S. R. DAs, RHAC'NATJ and SJNHA JJ.]
Indian Companies Act, (Act VII of 1913), s. 232(1) as amended
by Act XXll oj l936-'F/1e iuords "or any sale held without leave of
the Court of any of the propc;·tit"-·s of the Co1npa11y" added in the section-FVhethcr lef!islaturc intended to 1nake alteration
£n the !atu as
respects sales effected by secured creditor-Secured creditor-TVhcther
ouiside the toinding up--Construction_:Presumption against
i111plied
r1fteratict1 of law.
The secured creditor is outside the winding up and can realise
his securir:v \vithout the ieave of the winding up Court, though if he
files a suit or takes other legal proceedings for the realisation of his
security he is bound under s. 171 of the Indian Companies Act to
obtain the leave of the winding up Court before he can do so although
such leave \V1uld alinost automatically be granted.
2S.C.R.
SUPREME COURT REPORTS
375
It is a legitimate rule of construction to construe words in an
Act oi Parliament with reference to words found in immediate connection with them. It is also a well-recognized rule of construction
that the legisbture does
not intend to make a substantial alteration
in the law beyond what it explicitly declares either in express words
or by ckar implication and that the general words of the Act are
not to be so construed as to alter the previous policy of the law, unless no sense or meani'1g can be applied to those words consistently
with the intention of. p:eserving the existing policy untouched.
Held therefore that having regard to the context in which the
words "any sale
held without leave of the Court of any of the properties" added in s. 232( 1) bv the amending Act XXII of 1936 have
been used in juxtapos;tion witn "any attachment, distress or execution put into force without leave of the Court against the estate
or
effects" it would be a icgitimate construction to be put upon them
that they refer only to sales held through the intervention of
the
Court and not to sales effected by the secured
creditor outside the
winding up and without the intervention of the Court, and that the
amendment was not intended to bring within the >Weep of the general
words saks effected by the secured creditor outside the winding up.
Held accordingly that in the present case the sale effected by
respondent No. 2 as the receiwr of the trustees of the
debentureholders in July 1954 was valid and binding on all parties concerned
and could not be challenged as it was sought to be
done by the
Official Receiver.
Food Controller v. Cork (1923 A.C. 647), Kayastha Training and
Banking Corporation Ltd. v. Sat
Narain Singh (f 1921] I.L.R. 43
All. 433), Baldeo Narain Sfrigh
v. The United
India Bank Ltd.
([1915] 38 J.C. 91), State of West Rengal v. Subodh Gopal Bose and
others ( 1954 S.C.R. 587), Angus Robertson and others v. George Day
(L.R. [1879] 5 A. C. 63), Murugian, P. v. fainudeen, C. L. ([1954] 3
W.L.R. 682), National Assistance Board v. Wilkinson ([ 1952] 2 Q.B.
648), Vasudeva Mudaliar and others v. Srinivasa Pillai and another
([1907] l.L.R. 30 Mad. 426) and The Governor-General in Council v.
Shiromani Sugar Mills Ltd. (In
Liquidation) (1946 F.C.R.
40),
referred to.
CIVIL
APPELLATE
JURISDICTION :
No. 20 of 1955.
Civil
Appeal
Appeal from the Judgment and Order dated the
29th day of September
1954
of the High Court of
Judicature at Madras in Original Side Appeal No. l.13
)f 1954 arising out of
the order dated the 9th dav of
<\ugust !954 cf t'ie said High Court in its Ordi~ary
Original Civil Jurisdiction in Application No. 3542 of
1954.
48
1955
,\1. K. Ranganath••
and another
v.
Government of
Madras and othtrs
1955
M. K. Ranganathan
and anothlr
v.
Governtntnl of
Madras and otk1rs.
376
SUPREME COURT REPORTS
[1955]
C. K. Daphtary,
Solicitor-General
for
Umrigar,
Mohan
Kumaramangalam
Narain, with him) for the appellants.
R. H. Dhebar and P. G. Gokhale
No.
1.
India (H. /.
and
Rajinder
for respondent
Samarendra Nath Mukherjee and B. N. Chose for
respondent No. 2.
N. P. Engineer, (B. Moropant and V. f. Taraporewala, with him) for respondent No. 3.
1955. April 20.
The Judgment of the Court was
delivered by
BHAGWATI J .-This appeal with a certificate under
article 133 ( 1) ( c) of the Constitution is directed against
the Judgment of the High Court of J udicaturc at
Madras dismissing the appeal
of the Appellants and
refusing to set aside a sale effected by Respondent 2
of certain properties belonging to the Madras' Electric
Tramways (1904) Ltd. hereinafter called the Company,
above the ground at V epery, Madras and Mylaporc,
including the machinery cars, etc. and buildings as
scrap to Respondent
3 in
his capacity as the Receiver
of the trustees
of
the
debenture holders of the Company.
The Appellants are the Secretary and President
respectively of the Madras Tramways Workers Association (Registered No. 1_253) a Trade Union registered
under the Trade Unions Act. The workmen employed
by the Company are entitled under the award of the
Special Industrial Tribunal, Madras in I. D. No. 9 of
1953 published in the Fort St. George Gazette, dated
the 8th
July, 1953 being G. 0. Ms. No. 3024/53 to a
payment of nearly Rs. 7,00,000 out of which
the
workers belonging to the Madras Tramways Workers
Association alone would be entitled nearly to a sum
of Rs. 4,35,000 and are thus the major creditors of the
Company. The Company was incorporated in England
with its principal office situated at No. 1, Rundalls
Road, Vepery, Madras-7 and was running the Tramway Service in Madras with_ licence issued to it by the
Government under the Tramwayi Act. It had issued
2 S.C.R.
SUPREME COURT REPORTS
1300 First Debentures of £100 each and the debenture-holders
had appointed
the
Beawar Trust Ltd.,
England
as
trustees.
By
an Indenture made in
England on the 13th October 1924 the Company
charged by way of first charge in favour of the trustees
all its undertaking properties and assets for the time
being both present
and future
including its
uncalled
capital with the payment of all moneys for the time
being owing on
the security of the debentures and
such charge was to rank as a floating charge. By two
subsequent
deeds made
at
Madras dated the 26th
March, 1925 and 6th July,
1950 certain immovable
properties belonging to the company were mortgaged
in favour of the said trustees.
The said Trustees
appointed Respondent 2, the Managing Director of
the Company and day to day management of the
Tramway Service and of the business of the Compay, as their
Receiver~
He took possession as such
Receiver, from the midnight of 11th April, 1953 of all
the assets of the Company including moneys in the
bank to the credit of
the Company and after that date
the Tramways Service was suspended and still remains
suspended.
One J. B. Beardsdl, one of the Directors
of the
Company filed 0. P. No. 419 of 1953 as the duly constituted Attorney of the Company for winding up the
Company on the ground that it was unable to pay its
debts and that it had ceased to carry on its business ..
An order for the winding up of the Company was made
bv the Court on the 20th January, 1954 and the Official Receiver, High Court, Madras, was appointed the
Official Liquidator. Since all the assets including the
moneys of the Company were in possession of Respondent 2,
the Official Receiver was unable to take
charge of anything except the records of the
Company.
Soon after the order for winding up the Respondent 2 advertised
in
the newspapers on
the 23rd
January, 1954 for the sale of the properties and assets
of the Company. At the end of the conditions of sale
he stated in paragraph 7 that "the sales are for the
time being subject to the approval of the High Court
6-83 SC India/59
1955
M. K. Ranganathan
anti anotlur
v.
Govemmtnt of
MatirOJ and otherl
BhagwatiJ.
1955
M. K. RanganaJ/um
aad anotM
v.
Govemmmt of
M adra.s and others
-
...
Bhagwati J.-
378
SUPREME COURT REPORTS
[1955]
at Madras and it will be for the undersigned to obtain
such approval for accepted offers free of all costs to
the purchaser".
At the time of the order of winding up, two suits
were pending in the High Court, C.S. No. 191 of 1952
filed by the Company against the State of Madras for
Rs.
1,33,204-9-0 and interest thereon
being
electric
charges alleged to have Leen collected by the State of
Madras in excess of those
payable by the Company
and paid
by the company
under
protest
and C.S.
No. 368 of
1953 filed by
the State of Madras against
the Company for the recovery of Rs. 9,26,123-2-3 with
interest thereon,
being the diflerence
alleged
to
be
due in
respect
of
the electric charges
under the
old rates and the revised
rates applicable to the Company.
During the pendency of
the said
suits
Respondent
2 gave
an undertaking
in Application No.
4533 of 1953 in Civil Suit No. 368 of 1953 that he
would not without the orders of the High Court dispose of any of the assets of the Company which were
in his possession till the disposal of the suit C.S.
No·
368 of 1953.
The two suits aforesaid were tried to
gether and were disposed of by a common judgment
on the 16th Man:'.h 1954.
On the 16th July 1954 Respondent 2 agreed to sell
and Respondent 3 agreed to buy the movable properties of the Company the particulars of which were set
out in the agreement
entered
into
on that date, for a
price · of Rs. 4,01,658 of which half was paid on the
s;gning of
the agreement and the
other half was
agreed
to be paid out of the proceeds of sale to be
made by the purchasers of the assets as scrap.
On he 23rd July 1954 the Official Receiver, High
Court, Madras (Respondent 5 herein)
filed
an application No. 3542 of 1954 for setting aside the said 'sale
of the assets of the Company on the grounds, inter
alia, that it was prejudicial to the interests of the
General
body of unsecured creditors,
that
the
same
had been concluded with undue haste and without
adequate
publicity
and
in violation of Respondent
2' s said undertaking
to
the Court. It also asked for
an injunction
restraining
the
Respondent
2
from
2 S.C.R.
SUPREME COURT REPORTS
379
handing over
and the
Respondent
3
from
either
taking over or breaking up the assets
purchased
by
him pending the disposal of the said application.
This application was
based on a report of the Official Receiver in which after setting out the relevant
facts he submitted that even
though under section
729
of
the Indian Companies
Act the Company
which
was
admittedly insolvent was governed by
rules prevailing with regard to the respective rights
of the secured and unsecured creditors and to debts
provable and
valuation of annuities
governing the
administration
in insolvency and secured
creditors
generally stood outside the liquidation and were entitled to have the remedy of realising the security and
proving before him for the deficiency, if the properties of the Company could be sold for a price higher
than the amount due to the Trustees of the debentureholders there was a possibility of a surplus coming
into his hands for
the benefit of
the unsecured creditors.
If
the Respondent 2 proved before him for
any deficiency due to the secured creditors, it would
certainly affect
the rights
of unsecured creditors, and
moreover though the secured creditors might realise the
security, it will be
in the interests of the unsecured
creditors to
see
that a fair
and proper pncc was
obtained. He therefore submitted that in the interests of the unsecured creditors it was just and necessary
to have a fair valuation ascertained and an
enquiry held
to ascertain
whether the sale
by
the
Respondent 2 in favour of Respondent
3
was bona
fide and for a proper
price. Respondent 2 filed an
affidaYit in reply in August 1954 contending inter alia,
( 1) that the offer by the Respondent 3 was the
highest,
that he had received and that this
had
been
accepted bona fide, (2)
that in the advertisement
the
condition as to the previous sanction of the Court was
inserted because
of
the undertaking that he had
given to
the Court in C.S. No. 368 of 1953 and that
this undertaking
lapsed with the dismissal
of the said
suit on the 16th March 1954, (3) that
he had been
advised
by the Solicitors
in England for
the
deben-
~ure trustees that it was unnecessary for him to obtain
1955
M. K. RanganaJhan
and another
v.
Govnnmmt of
Madras and others
l1hagwati J.
1955
M. K. Ranganathan
and another
v.
Government of
Madras and others
· Bhagwati ].
380
SUPREME COURT REPORTS
[1955}
the sanction
of the Court and that
he had been instructed not to apply for such sanction
and ( 4) that
the sale was bona fide and he had secured as good a
price as could be obtained.
By its judgment and order dated the 9th
August
1954
Mr.
Justice
Balkrishna Ayyar
(in
Chambers)
dismissed
the said
application
with
costs.
The learned Judge
held
that
the question
whether
Respondent 2 had violated
the undertaking given by
him was
not germane
to the
application before him,
that undoubtedly
the Respondent
2 did give wide
publicity of
his intention
to
sell the assets of
the
Company,
that it could not be said that the sale was
sub rosa
on the ground of want of wide publicity to
the intended sale of the
Company's assets
and
that
the Respondent 3's offer was
the best offer
received
by the Respondent 2 looking both
to
the abstract of
offers appended to the affidavit of the Respondent 2
in
the
said
application,
and looking
to
the other
offers
pointed
out to him by Respondent
5.
The
learned Judge
further
referred
to
the offer of the
Corporation of Madras
and said that the said Corporation had not made any firm offer at all and that the
offer of one A. Chettiar ot Rs. 4,25,000 made
on 5th
August 1954
during
the hearing
of the application
was an offer made by a person who did not appear to
him to be of a man of sound financial status.
The
learned Judge in his judgment also
recorded the fact
that during the hearing of the
application
the
Respondent 3 offered · to sell
to
the
Madras
Municipal
Corporation the
entire
assets he had purchased at the
same price which he paid for
it but the Corporation
were not prepared to accept the offer.
The Respondent 5 accepted
the said
judgment and
decision and did not prefer any appeal against the
same.
But
the Appellants who were not parties to
the proceedings applied
for and obtained from the
High Court
leave to appeal
from the said
decision.
This appeal
also was "dismissed by the High Court
with wsts. on the 24th September 1954.
The
High
Court differed. from the finding of the Trial Court and
held
that due pt1blicity
had not . been given to
the
2S.C.R.
SUPREME COURT REPORTS
381
intended sale and observed that if the matter rested
merely on a decision of that point
they would have
allowed the appeal and set aside the sale. They however held that in the absence of fraud or want of bonafides on the part of the seller along with that
of the
buyer the sale in favour.
of
the Respondent 3 could
not be set aside.
The High Court further considered
the question whether the said sale was void
as
being
without the leave of the Court in view of section 232
of the Indian Companies Act and answered that question in the negative.
The High Court further held
that a secured creditor had a right to realise his security without seeking the assistance of the court and
remaining outside the winding up.
Being aggrieved by the said judgment and decree of
the High Court the Appellants applied for
leave
to
appeal to this Court and such leave was granted by
the High Court on the 24th September 1954.
The bona fides of the Respondent 2 in the matter of
the sale were not chal!tnged
either in the Courts
below or before: us and there were concurrent findings
of fact that the price obtained by Respondent 2 was
the best price
available under the circumstances.
It
was however urged by the learned Solicitor-General
for the Appellants:-(1) that the High Court, having
found that due publicity had not been given to the
intended sale, ought not to have allowed the Respondent 3 at that stage to raise the question as to whether the Court had any power or jurisdiction to set
aside the sale
except on the ground that it was
vitiated by fraud or
for want of bona fides and (2)
that the sale by Respondent 2 being a sale held without leave
of
the winding
up Court
was void under
section 232(1) of the Indian Companies Act.
The
High Court had allowed the Re~pondent 3 to raise the
question even at that late stage inasmuch as it was
a pure question of law and the learned Solicitor-General therefore rightly did not press the first contention before us.
The main argument centered round
the second contention, viz., whether the sale effected
by the Respondent 2 wihout leave of the winding
up Court was void and he~e liable to be set aside.
1!155
M. K. Ranganathan
and another
v.
Governintnl of
Madras and others
Bhagwati ].
1955
M.K. Ecanganathan
and onotkr
v.
GoDcrnmmt of
Madras and others
Bhagwati J.
382
SUPREME COURT REPORTS
(1955]
The
decision
of this question turns upon the true
construction of section
232 of the Indian
Companies
Act, which runs as under:-
"(l) Where any company is being wound up by
or subject to the supervision of the Court, any attachment, distress or execution put in force without leave
of the Court against the estate or effects or any
rale
held without leave of the Court of any of the properties
of the company after the commencement of the winding up shall be void.
(2)
Nothing in this
section applies
to proceedings by the Government".
It may be noted that the words "or any sale held
without leave of the Court of any of the properties"
underlined above
were inserted by Act XXII of
1936.
Before this amendment section 232
( 1) was almost in
identical terms
with section 228(1)
of the
English
Companies Act of 1948.
Two other section~ of the Indian
Companies Act
may be noted in this context, viz. section 171 :-
"When a winding up order has been made or a
provisional liquidator has been appointed
no suit or
other legal proceeding shall be proceeded with or commenced against the company except by leave of the
Court, and subject to such terms as the Court may
impose."
and Section 229 :-
"In the winding up of an insolvent company
the
same rules shall prevail and be observed with regard
to the respective
rights of secured and unsecured
creditors and to debts provable and to the. valuation
of annuities
and future and contingent liabilities
as
are in force for the time being under the law of insolvency with respect
to the estates of persons adjudged
insolvent; and all persons who in any such case would
be entitled to prove for and received dividends out of
the assets of
the company may come in under the
winding up, and make such claims against the company as they respectively are
entitled to by virtue of
this section;"
which correspond respectively to sections 231 and 317
of
the English Companies Act of 1948.
2S.C.R.
SUPREME COURT REPORTS
383
The position of a secured creditor m the winding
up of a company has been thus stated
by Lord Wrenbury in Food Controller v. Cor!\(1):
"The phrase 'outside the winding up' is an intelligible phrase if used, as it often is, with reference to a
secured creditor, say a mortgagee. The mortgagee of
a company in liquidation is
in a position to say
"the
mortgaged property is to the extent of the mortgage
my
property.
It is
immaterial
to
me whether my
mortgage is in winding up or not.
I remain outside
the 'winding up' and shall enforce my rights as mortgagee".
This
is
to be contrasted with the
case in
which such a creditor prefers
to assert his right, not
as a mortgagee, but as a creditor. He may say 'I will
prove in respect of my debt'. If so, he comes into the
winding up".
It is also summarised in
Palmer's Company Precedents
Vol. II, page 415:
"Sometimes the mortgagee sells, with or without
the concurrence
of
the liquidator,
in
exercise
of a
power of sale vested in him by the mortgage. It is
not necessary to obtain liberty to exercise the power
of -;ale, although orders giving such liberty have sometimes been made".
The secured creditor is
thus outside
the winding up
and can realise his security without the leave of the
winding up Court, though if he files a suit or takes
other
legal
proceedings for
the
realisation
of
his
security he is bound under section 231
(corresponding
with section 171 of the Indian Companies Act) to obtain the leave of the winding up Court before he can
do so although such leave
would almost automatically
be granted.
Section
231 has been read together with
section
228(1)
and
the
attachment,
sequestration,
distress or execution referred to in the latter have reference to proceedings taken through the Court and if
the creditor has resort to those proceedings he cannot
put them in
force
against the estate or effects of the
Company aL;· the commencement of the winding up
without
the leave of the winding up Court. The
(1) 1953 Appeal Cases 647.
1955
M.K. Ranganathatr
and another
v.
Govemmmt of
Madras and others
Bhagwati ].
1955
M.K. RanganatlilJn
and anolher
v.
Govtrnmlnl of
Madra.s and others
Bhagwati J.
384
SUPREME COURT REPORTS
[1955}
provisions in section 317 are also supplementary
to
the provisions of section 231 and emphasise the position of the secured creditor as one outside
the winding up, the secured creditor being, in regard to the
exercise of those rights and privileges, in the same
position as he would be under the Bankruptcy Act.
The corresponding provisions of the Indian Companies Act have been almost bodily incorporated from
those of the English Companies Act and if there was
nothing more,
the position of the secured creditor_
here also would be the same as
that obtaining in
England and he would also be outside the winding up
and a sale
by
him without the intervention of the
Court would be valid and could not be challenged as
void under section 232(1)
of
the Indian Companies
Act.
It was however urged that the addition of the
words "or any sale held without leave of the Court of
any of the properties" had changed the position of
the secured
creditor and
even
though the
secured
creditor realised
the security without the
intervention
of the Court such sale, if effected by him without the
leave
of
the winding up Court, was void.
It was
pointed out that these words did not find
their place
in the corresponding section 228(1) of the English Companies Act and therefore even though any attachment,
distress or execution put in force without leave of the
Court against the estate·
or effects of the company
after the commencement of the winding up was void
under the terms of the section 232 ( 1) as it originally
stood, the words "or any sale held
without leave of
the Court of any of the properties" of the company
were wide enough to include not only a sale ,held
through the intervention of the Court but also a sale
effected by the secured creditor without the intervention of the Court whether the sale was by private
treaty or by public auction.
It was contended on the
other hand
on behalf
of
the contesting
Respondent,
Respondent 3,
that the amendment was made in order
to get over the decision of the Allahabad High Court
in Kayasth~ Trading and Banking Corporation Ltd. v.
•
2S.C.R.
SUPREME COURT REPORTS
385
Sat Narain Singh(1 ) and that in any event on a true
construction of section 232(1}
as amended the words
"any sale held" had
reference in the context . only
to.
sales held by or effected through the intervention of
the Court and not sales effected
by the secured creditor without the intervention of the Court.
The decision of the Allahabad High · Court ahove
referred to ha<l hel<l on a construction of section·232(1)
as it then stood, that an execution was not put in
force
merely
when the property of
the
judgment-
<lebtor was sold in pursuance thereof, but it was pur
in force
when the property
was attached
and
hence
where the property of an insolvent company was
attached prior
to the <late of the commencement of the
winding up but
was actually sold subsequent to such··
date, the sale was not voi<l and could be upheld. There
was an earlier decision of the Patna High Court in
Baldeo Narain Singh v. The United India Bank Ltd. ()
in which a contrary decision had been reached exactly
under simiiar
circumstances.
It is
well-known that ·
this .conflict was
resolved and the decision of the ·
Allahabad
High Court was got over by inserting this '
amendment by Act XXII of 1936.
The statement of objects and reasons is certainly
not admissible as an aid to the construction of a statute.
But it can be referred
to for the limited purpose of ascertaining the conditions prevailing at the
time which actuated the sponsor of the Bill to introduce the same and the extent and urgency of the evil
which he sought to remedy.
State of West Bengal v.
Subodh Gopal Bose and Others( 3 )
The amendment of
section 232( 1) inserted
by Act
XXII of 1936 was designed to prevent such sales as were upheld by the ·
decision of the Allahabad
High Court in Kayastha
Trading and Banking Corporation Ltd. v. Sat Narain
Singh(1) and it would be permissible to refer to
that
portion
of the statement of
objects
and reasons for
the purpose
of ascertaining
the extent and
urgency
of the evil which was sought to be remedied by introducing the amendment. It follows therefore that the
(1) [1921] T.L.R. ·f3 Allahabad 433.
(2) (1915] 38 Indian Case$ 91.
(3) (1954] S.C.R. 587, 628.
1955
M.K. Ranganathan
and another
v.
Government of
Madras and.others
Bhagwati J.
386
SUPREME COURT REPORTS
[1955]
.
\
1955.
amendment could. not have been intended . to .bring
M
-
within the sweep of the-general words"or any sale held
·i:::t;!~~~:·an without the leave of the Court of any of the properv.
ties" sales effected by the secured. creditor outside
Government of
the Winding up. _
.
'
l!Iadrasandothers
Even apart from this intendment there are certain
canons of construction which also tend to support the
Bhagwati J • -· same conchision. Prior to the amendment the law was
. well-settled both in England and in India .that the
secured creditor.was outside the .winding up and he
could realise his security without the intervention of
the. Court by effecting a sale of the mortgaged pre~ .
mises by private treaty or by public auction.: It was
only when the intervention of the Court was sought
either by_ putting in force any attachment, distress or
execution within the meaning of section 232(1) as it
stood before the amendment or proceeding with or
·, commencing a suit or other legal proceedings_against
the company within the meaning of section 171 that
leave of the Court was necessary and if no such leave
was obtained the remedy could not be availed of by
the secured creditor. The sale of the mortgaged premises was also brought by the amendment on .a par
with the attachment, distress or- execution put- in
force at the insfarice of the secured credifoi .. and
ha virig regard to the context such sale . could orily be
construed to be a sale held through the intervention
of the Court and not one effected by·. the secured
creditor outside the winding up and without the
intervention of the Court.
·
' ..
_It is a well-recognised rule . of construction that .
"when two or more words which are susceptible of
analogous meaning are coupled together. noscunter a
sociis, they are understood to be used in their cognate
sense. They take, as it were, their colciur from each
-- other, that is, the more general is restricted to · a
sense analogous to the less_. general.
(Maxwell ou
Interpretation of Statutes, Tenth Edition, p. 332).
The Judicial Committee of the Privy Council also ·
· expressed itself in similar terms in Angus Robertson
& Others v. George Day(1):-
(1) [1879) L,R. 5 A.O. 63, 69.
2 S.C.R.
SUPREME COURT REPORTS
387
"It is a legitimate rule of construction to construe words in
an Act of Parliament with reference to
words found in immediate connection with them".
Having regard therefore to the context in which these
words "any sale
held without leave
of the Court of
any of the properties" have been used in juxtaposition with "any attachment,
distress
or execution put
into force without leave of the Court against the
e~tate or effects" it would be a
legitimate construction to · be put upon them that they refer only to sales
held through the intervention of the Court and not
10 sales effected by the secured creditor outside the
winding
up and without the intervention of the
Court.
There is also a presumption against implicit alteration of law and that is enunciated by Maxwell on
Interpretation of Statutes, 10th Edition, at page
81
in the following terms:-
"One of these presumptions is that the legislature
does not intend to make any substantial alteration in
the law beyond what it explicitly declares, either in
express terms or by clear implication, or, in other
words, beyond the immediate scope and object of the
statute.
In all general matters
outside those
limits
the law remains undisturbed.
It is in the last degree
improbable
that
the
legislature
would
overthrow
fundamental
principles,
infringe
rights,
or
depart
from the general system of law, without expressing
its intention with irresistrble clearness ................ "
This passage from Maxwell was approved of by Their
Lordships of the Privy Council in Murugian, P. v.
Jainudeen; C. L. (1) and Their Lordships agreed that the
law. was correctly stated in the passage just cited. To
the same effect are also the observations of the Court
of Appeal in National Assistance Board v. Wilkinson (2)
where it was held that the Statute is
not to be taken
as affecting a fundamental alteration in the general
law unless it uses
words pointing u11mistakably
to
that conclusion.
In
that case at page 658 Lord
Goddard, C. J. observed :-
\ l) [1954] 3 Weekly Law Reports 682, 687.
(2) [1952] 2 Q. B. 648.
1955
M. K. Ranganathan
and anothn
v.
Govmimmt of
Madras and other.r
Bhagwati J.
1955
Al. K. J?anganathafi·
and· another ·
v.
Govtrnmtnl of
Madras and other$
Bhagu;ali 'J~
388
SUPREME COURT REPORTS
[1955]
.• ,. "But it 1nar ·be presumed
that the
legislature
does not' intebd
to make a substantial
alteration
m
the law beyond what it expressly declares.
In Mi11et
V. Leman('), Sir ·John Romilly, M. R. stated as a
principle ' ofrc-0ristruction which could not be disputed
that 'thergeneral' words of the Act· are not to be so
construed · as.·· to alter
the previous policy of the law,
unless
n-o ·sense• ·or meaning can be applied
to those
words· consistently: with the "intention of· preserving
the: existing policy ··untouched' ".
'
'·· 'IC the construction sought to be put upon the
words "or'' any"s:fre held without ieave of the Court of
any
of
the 'properties" by
the Appellants
were
accepted it would effect
a fundamental
alteration in
t!l'e law as it stood- before the amendment was inserted
in section 232(1)' by Act XXII of 1936:
Whereas before the' amendment the secured creditor stood outside the winding up and could if the mortgage deed
so' provided, realiSe his security without the intervention of- the Court · by effecting a sale either by private
treaty" or by public auction, rio such sale could be
effected 1·by him after the amendment and that was
certainly a fondament:il alteration in
the law
which
could not be effected unless one found words used
which pointed
unmistakably to
that conclusion or
unless such intention was expressed with irresistible
clearness.
Havirig regard to the circumstances under
which the amendment was inserted in
section 232(1)
by Act XXII of 1936 and also having regard to the
context we are not''prepared to hold that the Legislature in inserting that amendment intended to effect
a fundamental
alteration in law
with
irresistible
clearness. -Such -a- great and sudden
change of policy
could not •be attributed to the Legislature
and
i'.
wou !d 'he legitimate therefore to
adopt the
narrower
interpretation
of
those
words
of
the
amendment
rathfr · than· an· interpretation -which would have the -
contrary effect.
(Vide the observations of the Privy
Council "iii Vasude11a Mudaliar & Others v. Srinivasa
Pillai & another(').
(I) [1855] 20 Beav. 269. .• ·
·' - ,
(2) \l 907) L L. R. 30 Madras 426, 433.
'
2 S.C.R.
SUPREME COURT REPORTS
389
It may be observed in this connection that· section
171
enacts
a general
provision with regard to
suits or other legal procee<lings to be proceeded with
or commenced against the company after a winding
up order has been made and lays down that no suit
or other legal proceedings shall be proceeded with or
commenced against the company excern by leave of
the Court and subject to such terms as the Court may
impose.
This general provision is
supplemented
by
the
1 supplemental provisions to be found
respectively
in sections 229
and 232(1) of the Act.
Section 229
speaks of the application of insolvency rules in winding up of insolvent
companies and . section
232(1)
speaks of the avoidance of
certain
attachments, executions, etc., put into force without the leave of the
Court against the estate and effects of the . company
and also of any sale . held without the leave of the
Cour.t of any of t!1e properties of the company after
the '.commencement of the winding up.
Section 229·
recognises
the position of
the secured creditor generally,
as
outside
the winding up but enables him in
the event of his desiring to take the benefit of the
winding up proceedings to prove his debt, to value
the 'same and share in the distribution
pro
rata
of the assets of thf' company just in the same way as
he would be able to do in the case of insolvency under
the Presidency Towns Insolvency Act or the Provincial Insolvency Act. Section 232(1) also has reference
to legal proceedings in much the same way as legal
proceedings envisaged by section 171 of the Act and
the attachment, distress or execution put in force or
the sale held are all of them legal proceedings which
can only be resorted to through .the intervention of
the Court.
The word "held". in connection with the
sales contemplated within the terms of the amended
section
also lends
support to this conclusion and this
conclusion is further fortified by the terms of section
232(2) which says that nothing in this section . applies
to proceedings by the Government,
thus
in
effect
indicating that wbat are referred to in section 232(1)
are proceedings within the meaning of that term as.
11seJ in section 171 of the Act.
1955
M. K. Ranganatho11
and another
v.
Governmtn/ nf
Madras ani otki•s
•· Bhagwati ].
"1955
M. K. Rangaruzt/u111
and another
••
Governmmt of
Madras and others
BhagwaJi J.
390
SUPREME COURT REPORTS
[1955]
The Federal Court also put a similar construction
on the provisions
of section 171 read with
section
232(') of the Act in The Governor-General in Council
v. Shiromani Sugar Mills Ltd. (In Liquidation)('):
"Section 171 must, in our judgment, . be construed
with reference to other sections of the Act
and the
general scheme of administration
of the assets of a
company
in liquidation
laid
down by
the Act. In
particular, we would refer to section 232. Section 232
appears
to us to be supplementary to section 171 by
providing
that any creditor (other than Government)
who goes
ahead, notwithstanding
a winding-up order
or in ignorance of it, with any attachment, distress,
execution
or sale,
without the previous leave of the
Court, will find that such steps are void. The reference to "distress" indicates that leave of the Court
is required for more
than the initiation of original
proceedings in
the nature of a suit in an ordinary
Court of
law.
Moreover, the scheme of the application of the company's property in the pari passu
satisfaction of its liabilities, envisaged in section 211 and
other sections of the Act, cannot be made to work in
co-ordination, unless
all creditors (except such secured
creditors as are "outside the winding-up" in the sense
indicated bv Lord W renbury in his speech in Food
.Controller v. Cork( ) at page 671) are subjected as to
their actions against
the· property of the company to
the control of the Court.
Accordingly, in our judgment, no narrow construction should be placed
upon
the words "or other legal proceedings" in section 171.
In our judgment,
the words
can and should be held
to · cover
distress
and execution
proceedings
in the
ordinary Courts. In our view, such proceedings are
other legal proceedings against the company, as
contrasted with ordinary suits against the company".
We are therefore of the opinion that the sale effected
by Respondent 2 "' the Receiver of the Trustees of
the debenture-holders on the 16th July 1954 was valid
and binding on all parties concerned and
could not
be challenged as it was sought to be done
by
the
•
(I) [1946] F. C. R. 40, 55.
(2) 1923 A.G. 647.
2 S.C.R.
SUPREME COURT REPORTS
391
Official Receiver.
The position was rightly summed
up by the High Court as under:-
"W e thus
reach
the position that no leave of
Court was
needed
before
the Receiver appointed by
the mortgagee debenture-holders exercised the
power
of sale and that as there is no allegation of want of
bona ft.des or recklessness or fraud against the Receiver
in exercising such a power, it would follow that the
sale held by the Receiver
is valid and effectual to
convey
title
to the purchaser and that such
a sale
cannot be avoided on the ground either of want of
due notice given
by the Receiver before effecting the
sale or on the ground of undervalue".
The result therefore is that the appeal fails and must
be dismissed with costs of the contesting Respondent
3.
The other Respondents
who have appeared before
us will bear and pay their own costs of the appeal.
OM PRAKASH GUPTA
ti.
THE ST ATE OF UTT AR PRADESH.
[VIVIAN BosE, BHAGWATI, JAGANNADHADAS,
VENKATARAMA AYYAR, S1NHA and IMAM, JJ.]
Government servant-Order of dismissal-Suit fOt" declaration
that order dismissing the appellant from service was. illegal-Court
fee paid on an alte.-native claim fol" damages which was subsequently
given up-Refund of-Whether could be granted-Arrears of pay--
Claim for-LApse of suspension order after order of dismissal.
The appellant, a member of the United Provinces Civil (Executive) Service, was suspended from service with effect from the 24th
August, 1944, pending aP enquiry into his conduct.
As a result of
enquiry and report by the Commissioner, the Government passed an
order on the 25th November, 1944, dismissing the appellant from
service, which order was served on the appellant on the !st December, 1944.
The appellant instituted a suit for a declaration that the order
of dismissal passed against him was wrongful, illegal and inoperative,
and that he continued to be in service and was entitled to a decree
for recovery of arrears of his sal:rry.