Dhirendra Chandra Pal vs Associated Bank Of Tripura Ltd.

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeal No. 91 of 1953

Decision Date: 6 December 1954

Coram: B. Jagannadhadas, Mehar Chand Mahajan, Natwarlal H. Bhagwati

In this case, the Supreme Court of India considered an appeal filed by Dhirendra Chandra Pal against Associated Bank of Tripura Ltd., which was in liquidation. The judgment was delivered on 6 December 1954 by a Bench consisting of Justice Jagannadhadas, Justice Mehar Chand Mahajan and Justice Natwarlal H. Bhagwati. The citation of the decision is 1955 AIR 213 and 1955 SCR (1) 1098. The matter arose under the Banking Companies Act of 1949, specifically sections 45‑B and 45‑G as inserted by Act XX of 1950. The principal issue concerned the procedure for deciding claims under section 45‑B. The Court explained that the object of the Act is to provide a machinery for expeditious and speedy termination of proceedings in liquidation. In the absence of specific provisions to the contrary or rules framed by the High Court under section 45‑G, the normal procedure for deciding all claims under section 45‑B should be a summary proceeding that originates with an application. However, the Court held that, at its discretion, it may direct, or the High Court rules may provide, that a suit is the proper remedy where the nature of the claim and the questions involved require it. The Court referred to the earlier decision in Sree Bank v. Mukherjee for support.

The appeal, numbered 91 of 1953, was taken from a judgment and decree dated 12 June 1951 of the Calcutta High Court, which itself was an appeal from original decree No. 56 of 1951 arising out of a decree dated 8 March 1951 in suit No. 3993 of 1950. Counsel for the appellant were H.J. Umrigar, Rameshwar Nath and Rajinder Narain; counsel for the respondent were A.N. Sinha and P.C. Dutta. The Court noted that the appeal was permitted by leave of the High Court under article 133(1)(c) of the Constitution. It observed that sections 45‑B and 45‑G, inserted by Act XX of 1950, were later renamed sections 45‑B and 45‑U by section 10 of Act LII of 1953. The factual background was that the respondent bank entered liquidation on 19 December 1949. A month earlier, on 19 November 1949, the appellant had entered into a tenancy agreement with the bank for a parcel of land, the agreement requiring the appellant to vacate the demised premises upon giving twenty‑four hours’ notice. After liquidation, the liquidator served a notice on 18 April 1950 terminating the tenancy and demanding possession by the end of April 1950. When the appellant failed to comply, the liquidator filed an application under section 45‑B for ejectment and obtained an ex parte decree on 10 July 1950. The appellant’s application to set aside that decree was dismissed on 7 September 1950, leading him to file the present suit on 12 September 1950 seeking a declaration that the ex parte decree was beyond jurisdiction, a nullity, and that his tenancy continued notwithstanding the decree.

After Associated Bank of Tripura Ltd. entered liquidation on 19 December 1949, the liquidator served the appellant with a notice on 18 April 1950 that terminated the tenancy and required the appellant to vacate the demised land and to surrender possession by the end of April 1950. Because the appellant did not comply with that demand, the liquidator instituted an application before the original side of the Calcutta High Court under section 45‑B of the Banking Companies Act seeking the appellant’s ejectment. The liquidator succeeded in obtaining an ex parte decree for ejectment on 10 July 1950. The appellant then filed an application on 28 August 1950 requesting that the ex parte decree be set aside; the application was dismissed on 7 September 1950. In response to the dismissal, the appellant instituted a suit on 12 September 1950 in the original side of the High Court. In that suit he prayed for a declaration that the ex parte decree had been passed without jurisdiction and was therefore a nullity, and that, notwithstanding the decree, he continued to be a tenant of the land. The plaint did not specifically set out the ground on which the decree was claimed to be without jurisdiction or a nullity. However, at trial the appellant’s counsel argued that the Court possessed no power to decide an ejectment matter in a summary proceeding initiated by an application and that the Court could grant such a decree only after a regular suit had been filed. This contention was founded on a decision of the Calcutta High Court dated 24 August 1950, which held that a summary proceeding under section 45‑B was not maintainable and that a suit was the proper mode of proceeding. That decision has been reported in the case of Sree Bank v. Mukherjee.

The trial judge, who heard the present suit, expressed the view that although the ex parte decree for ejectment had been obtained through an inappropriate proceeding, the Court did not lack jurisdiction per se, and the procedural irregularity did not render the decree a nullity. The appellate bench affirmed the trial judge’s conclusion. It is undisputed that the relief of ejectment sought by the liquidator falls squarely within the ambit of section 45‑B of the Banking Companies Act and that the liquidator is entitled to obtain such relief by an appropriate proceeding before the High Court. The appellate judges specifically held that, by virtue of section 45‑B, the Court possessed jurisdiction over the subject‑matter of the dispute, and that finding has not been challenged, given the wide and comprehensive language of the statutory provision. Nevertheless, the appellant contended that, because the Court had adopted the view expressed in the Sree Bank case—whose correctness had not been contested—that the proper proceeding to obtain the relief under section 45‑B was only a suit, the Court should, consistently with that view, have treated the decree obtained on a mere application as invalid.

The Court held that a decree obtained solely on the basis of an application was invalid. In the lower Court the issue was whether a decree issued in a proceeding that was fundamentally erroneous was so devoid of jurisdiction that it amounted to a nullity, or whether the decree was merely affected by an irregularity in the manner in which relief was obtained and therefore could not be attacked in collateral proceedings. The Court considered that it would be more appropriate to examine the underlying assumption that gave rise to this dispute, namely the proposition that the only appropriate proceeding contemplated by section 45‑B was a suit and not an application. To address that proposition the Court turned to the relevant statutory provisions. Section 45‑A of the Banking Companies Act, 1949, as amended by Act XX of 1950 [55 C.W.N. 400], defined the term “Court” for the purposes of Parts III and III‑A as the High Court exercising jurisdiction at the place where the registered office of the banking company that is being wound up is situated. That section further stipulated that, notwithstanding any contrary provision in the Indian Companies Act, 1913, or any notification, order, direction or other law then in force, no court other than the one specified could entertain any matter relating to or arising out of the winding‑up of a banking company. The next provision, section 45‑B(1), stated that, notwithstanding any contrary provision in the Indian Companies Act, 1913, or any other law then in force, the Court shall have full power to decide all claims made by or against any banking company, all questions of property, and any other questions of law or fact that may relate to or arise during the winding‑up of the banking company and that fall within the Court’s cognizance. Section 45‑G empowered the Court to make rules, consistent with the Act, concerning the mode of proceedings for adjudicating claims and other matters under the Act. Collectively, these sections in Part III‑A represented a marked departure from the corresponding provisions of the Indian Companies Act. Under several provisions of that earlier Act, once an order for winding up of a company was made, the liquidator could approach a Company‑Court to exercise certain powers intended to assist and accelerate the liquidation process, and the usual method for doing so was by way of an application. However, the range of matters for which the liquidator could obtain assistance from the Company‑Court through a summary procedure was relatively narrow. For other categories of matters, particularly those involving the collection of assets or the recovery of property from third parties that were not covered by sections 185 and 186, the liquidator was required to seek the assistance of the appropriate Court through the ordinary procedural route.

The Court observed that when a liquidator must approach the appropriate Court in the ordinary manner, the proceedings inevitably entail considerable delay and expense. In 1949, special legislation concerning Banking Companies was enacted with the explicit purpose of establishing a mechanism that would expedite and promptly conclude liquidation proceedings of such companies. However, it soon became apparent that the 1949 Act, as originally framed, was insufficient to fulfil that objective. Consequently, the Amending Act of 1950 introduced an entire new chapter, identified as Part III‑A, into the 1949 Act. This chapter comprised sections 45‑A to 45‑H and was titled “Special provisions for speedy disposal of winding up proceedings.” The Court considered that, in line with the policy reflected in the Amending Act, where a liquidator seeks relief under section 45‑B for matters that legitimately fall within its ambit, the legislature did not intend that the liquidator be forced to commence elaborate suit proceedings that would consume time and money to the detriment of the interests of the company under liquidation.

In the absence of any explicit provision within the Act itself prescribing a detailed procedure, and in the absence of any rules framed by the concerned High Court under section 45‑G, the Court held that the appropriate procedure must be left to the judgment and discretion of the Court, taking into account the nature of the claim and the questions involved. The Court referred to the earlier Sree Bank case, where the central issue presented for determination was the question of limitation. The learned Judges in that case were urged to consider that if the proper proceeding were an application rather than a suit, uncertainty might arise regarding the applicable period of limitation. The Judges, however, deemed it unnecessary to decide whether the Limitation Act applied to applications filed under section 45‑B, or, if it did, which limitation period would govern such applications. They proceeded to resolve the specific dispute before them—a claim for a debt owed to the Bank—on the basis that “there is nothing in the Companies Act or the Banking Companies Act which permits a liquidator to recover debts from debtors of a Banking Company by a summary proceeding such as an application to the Company Judge.” Accordingly, they held that no application for recovery could be entertained and that only a suit could be filed, with the limitation period being the ordinary period prescribed by the Limitation Act.

With due respect to the learned Judges, the Court expressed that this approach to interpreting the nature of the proceeding authorized or required under section 45‑B of the Banking Companies Act was erroneous. The Court clarified that the issue was not whether section 45‑B allowed summary proceedings, but rather whether the section definitively prescribed a particular mode of proceeding and whether, consistent with the Act’s policy, it should be assumed that a speedy and inexpensive remedy was available to the liquidator unless the Court, exercising its discretion, or the High Court rules directed otherwise.

The Court observed that the liquidator should have access to a remedy that is both swift and inexpensive, except when the court, exercising its discretion, directs otherwise or when the High Court rules require a particular claim to be pursued through a regular suit. It is important to recall that section 45‑B of the Banking Companies Act does not limit itself to claims for monetary recovery or for the return of movable or immovable property. Instead, the provision embraces every type of claim that originates in or is connected with the winding‑up process of a banking company. Consequently, the usual mode of proceeding that section 45‑B envisions is a summary application rather than a full‑scale suit. In the present matter, the Court holding the ex parte decree was fully empowered to adjudicate the issues presented in the summary application. Accordingly, the ex parte decree that was issued, and which later became the subject of the present suit, was validly passed by the lower court. The Court also affirmed that the lower courts’ order dismissing the suit was correct and required no alteration. The Court expressly refrained from expressing any view on the limitation question that had been raised before the High Court in the earlier Sree Bank case. It noted that the limitation issue should be examined in a proper case where it is directly presented for determination. On these grounds, the appeal was dismissed and the appellant was ordered to bear the costs of the proceedings.