1. Company becoming public limited, is of no consequence in so far as its rights and obligations are concerned

Wasava Tyres & Ors. vs. Printers (Mysore) Ltd. [(2007)] 139 Comp Cas 446 (Karn)].

The Respondent Company/Plaintiff filed the suit against the Appellants for possession and sought damages/mesne profits for the period after termination of the tenancy. The Respondent Company before filing the suit terminated the tenancy by issuing notice u/s 106 of the Transfer of Property Act.

The trial court allowed the suit and granted decree directing the tenants to vacate and deliver vacant possession of the tenanted premises. The Court further directed payment of damages and interest on the damages.

The Appellant tenants filed appeals contending that the suit should fail since the Respondent Company had become a public limited company by legal fiction in view of the provisions contained in section 43A as its turnover had exceeded Rs. one crore. Secondly, it was contended that the Managing Director who had filed the suit had no proper authorization from the board of directors. In this regard the Appellants relied on the ruling of the Calcutta High Court in Al-Amin Seatrans Ltd. vs. Overseas and Party interested in Vessel m.v. "Loyal Bird" (AIR 1995 Cal 169).

The Court as regards the first contention held that a company becoming a public limited company is of no consequence in so far as the rights and obligations of the company are concerned, nor would it render any legal proceedings by or against it defective by virtue of section 23(3) of the Companies Act, 1956.

The Court distinguishing the case of Al-Amin Seatrans Ltd. (supra) observed that there was a dispute between the two groups in the board of directors. One group headed by the managing director had filed the suit based on the articles of association of the company. In view of the dispute between the two rival groups of directors it was held that the managing director had no complete representative capacity to file a suit on behalf of the company. However, in the present case, there is no disagreement amongst the directors for filing of the suit in question. In fact, the suit is obviously filed for the benefit of the company.

The Court, dismissing the said appeals, held that the institution of a suit on behalf of the company by the managing director is deemed to be within the meaning of "substantial powers of management" since such a power is necessary and incidental for managing the day-to-day affairs and business of the company. The words "substantial powers of management" specifically exclude certain acts from their purview. Therefore, except the excluded acts the managing director has the power and privilege of conducting the business of the company in accordance with the memorandum and articles of association of the company.

2. No further appeal lies to Division Bench from order passed in appeal against order of official liquidator

Canara Bank & Ors. vs. Mopeds India Ltd. (In Liquidation) [(2007) 139 Comp Cas 514 (AP)]

In appeals filed by the bank and the State Financial Corporation under clause 15 of the Letters Patent, 1865 and section 483 of the Companies Act, 1956, the Respondents contended that from orders passed in an appeal against the order of the official liquidator, a further appeal to the High Court was barred in view of the amendment to section 100A of the Code of Civil Procedure, 1908, with effect from 1st July, 2002. The Appellants on the order hand submitted that the order passed by the company judge is not and order passed in a judicial proceeding, as such the word "appeal" used in rule 164 of the Companies (Court) Rules, 1959 (i.e., " the Rules") was a misnomer.

The Court observed that Rule 163 gives power to the official liquidator to accept or reject the proof furnished and it lays down that after such investigation as he may think necessary, the liquidator shall in writing admit or reject the proof, either in whole or in part. Every decision of the liquidator accepting or rejecting a proof, either wholly or in part, shall be communicated to the creditor concerned by post: under certificate of posting where the proof is admitted and by registered post for acknowledgment where the proof is rejected wholly or in part, provided that it shall not be necessary to give notice of the admission of a claim to a creditor who has appeared before the liquidator and the acceptance of whose claim has been communicated to him or his agent in writing at the time of acceptance. Where the liquidator rejects a proof, wholly or in part, he shall state the grounds of rejection to the creditor in Form No. 69 and admission of proof in Form No. 70.

The Court further observed that section 460(6) of the Companies Act, 1956 lays down that any person aggrieved by an act or decision of the liquidator may apply to the court, which may confirm, reverse or modify the act or decision complained of, and make such further order as it think just in the circumstances.

Section 483 of the Act deals with appeals from orders. It lays down that appeals from any order made, or decision given, in the matter of the 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 conditions under which, appeals lie from any order or decision of the court in cases within its ordinary jurisdiction.

The Court further observed that the appellate jurisdiction involves a re-hearing on law as well as on facts and is being invoked by an aggrieved person. The word "appeal" is not defined in the Code of Civil Procedure or any other laws. It would mean that an appeal was a judicial examination of a judgment passed by an inferior judicial authority. A statutory authority should be able to correct the erroneous finding arrived at by an inferior authority and in the absence of such correction by the superior authority the order or finding given by the inferior authority would be final and executable.

After analysing the relevant sections and rules the Court, dismissing the appeals, held that if the notice issued under rule 163 of the Companies (Court) Rules, 1959 by an Official Liquidator was not challenged by way of an appeal in terms of Rule 164, the notice would become enforceable and executable. The remedy provided under rule 164 of the Companies (Court) Rules, 1959, was actually an appeal and not a mere proceeding which could be termed as a misnomer for an appeal. Therefore, further appeal would not lie to the Division Bench.

3. Limitation prescribed u/s. 468 of Criminal Procedure Code is not applicable to continuing offence

Kishan Prasad Palaypu vs. Registrar of Companies [(2007) 139 Comp Cas 536 (AP)].

In the present case the question for consideration before the Andhra Pradesh High Court was "whether failure to comply with the statutory requirement of section 220 of the Companies Act, 1956 can be said to be a continuing offence or not?

The Division Bench of the Calcutta High Court in National Cotton Mills vs. Assistant Registrar of Companies (56 Comp Cas 222) held that an offence u/s. 162 of the Act is not a continuing offence within the meaning of section 472 of the Code of Criminal Procedure (hereinafter referred as "Cr.P.C) and, therefore, the complaint is barred by limitation u/s. 468 of the Cr. P. C. It relied on the decision of the Supreme Court in case of State of Bihar vs. Deokaran Nenshi (AIR 1973 SC 908) and two of its earlier decisions in Wire Machinery Manufacturing Corporation Ltd. vs. State (49 Comp Cas 197) and Krishna Kumar Dalmia vs. State [(1981) 2 Cal HN 301)] wherein it was held that the offence was for failure to deposit the employer’s contribution within the time prescribed under the Employees’ Provident Funds and Miscellaneous Provisions Act is not a continuing offence. However, both the decisions have been overruled in Bhagirath Kanoria vs. State of M.P (AIR 1984 SC 1688).

Thereafter, the single judge of Karnataka High Court in case of Chandra Spinning and Weaving Mills P. Ltd. vs. ROC (69 Comp Cas 117), after following the decision of the Calcutta High Court decision in case of National Cotton Mills (supra), held that the contravention of section 220(1) made punishable u/s. 220(3) of the Act is not a continuing contravention.

However, another Division Bench of the Calcutta High Court in Luxmi Printing Works Ltd. vs. Asst. ROC (69 Comp Cas 442) after considering the judgments of the Supreme Court in Deokaran Nenshi (supra) and in Bhagirath Kanoria (supra) held that the offence punishable u/s. 162(1) is a continuing offence and further held that the decision in National Cotton Mills (supra) can no longer be taken as good law particularly, in view that the decisions relied on in that case have been overruled by the Supreme Court and the decision of the Supreme Court has been explained and distinguished.

Further, a Division Bench of the Kerala High Court in Rani Joseph vs. ROC (103 Comp Cas 928) held that the offence for violating the provisions of section 220 of the Act can be treated as a continuing offence and so the provisions of section 468 of the Code has no application.

Thus, their Lordships of the Andhra Pradesh High Court after considering the aforesaid decisions held that since section 162(1) of the Act, imposes a penalty as long as the default continues, the offence u/s. 220 of the Act must be held to be a continuing default covered by section 472 of the Cr. P.C. Any contravention of section 220(1) of the Act made punishable u/s. 220(3) is a continuing offence and the period of limitation prescribed u/s. 468 of the Cr.P.C. would not be attracted.

4. Where suit for dissolution of firm dismissed for default, company court ordering dissolution in winding up petition, not proper

Progressive Constructions Ltd. vs. P.S.V.P. Vittal Rao (Deceased) and Anr. [(2007) 139 Comp Cas 807 (AP)].

The first respondent filed an application before the company court for winding up u/s. 433 of the Companies Act, 1956, of the Appellant company which was formed to take over a partnership firm "Progressive Engineering Company" (i.e., "PEC") of which the first Respondent was a partner. However, the company judge instead of ordering winding up, passed an order dissolving the firm u/s. 44(g) of the Partnership Act, 1932 and directed settlement of accounts amongst its partners. The contention of the Appellant was that in the facts and circumstances of the case, the company judge could not have ordered dissolution of the firm PEC and, as such, the order needs to be struck down.

It is pertinent to mention that being aggrieved by the order of the company judge ordering the dissolution and not the winding up, the first respondent had also filed an appeal, but this appeal was dismissed as not pressed. The first respondent had also filed a suit for dissolution of the partnership, which was dismissed in default by the First Additional Judge, City Civil Court.

Thus, as a matter of fact, the relief sought in the suit, which was allowed to be dismissed in default, was now granted by the company judge in the winding up petition.

Their Lordships held that the company judge having found that the company was doing well and the business was flourishing failed to take into consideration that the suit filed seeking dissolution of partnership was dismissed for default and that the matter stood concluded between the parties as the order passed became final.