Jyoti Bhushan Gupta vs The Banaras Bank Ltd

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 198 of 1956

Decision Date: 12 October 1961

Coram: J.C. Shah, Bhuvneshwar P. Sinha, J.R. Mudholkar

In the matter of Jyoti Bhushan Gupta versus The Banaras Bank Ltd, a judgment was delivered by the Supreme Court of India on 12 October 1961. The opinion was authored by Justice J.C. Shah, who was joined on the bench by Justice Bhuvneshwar P. Sinha and Justice J.R. Mudholkar. The petitioner in the appeal was Jyoti Bhushan Gupta and the respondent was The Banaras Bank Ltd. The case is reported in the 1962 volumes of the All India Reports (AIR 403) and the Supreme Court Reports Supplement (1962 SCR Supl. (1) 73). The citator notes reference F 1971 SC 218 (5). The central question concerned the period of limitation applicable to an execution application filed against an order of the Allahabad High Court directing certain contributors to pay money to the official liquidator of the bank.

The High Court had ordered the compulsory winding up of The Banaras Bank Ltd and, under section 187 of the Indian Companies Act, 1913, had directed the appellants, whose names appeared on the list of contributors, to remit a specified sum with interest to the official liquidator. More than three years elapsed before the liquidator filed an application for execution of that order. The appellants argued that the execution application was barred because it was not presented within three years as prescribed by article 182 of the Indian Limitation Act, 1908. Conversely, the liquidator contended that the High Court’s order was rendered in the exercise of ordinary original civil jurisdiction, and therefore the limitation period of article 183, which extends to twelve years, should apply.

The Court held that article 183 was the appropriate provision and that the execution application was timely. It observed that the order was indeed issued by the High Court in the exercise of its ordinary original civil jurisdiction as contemplated by article 183. Although the Letters Patent did not expressly confer original jurisdiction on the High Court, such jurisdiction could be given by statute. Section 187 of the Indian Companies Act, 1913, empowered the High Court to decree payment of amounts due by debtors of companies that were ordered to be wound up. This jurisdiction was ordinary, not extraordinary, and was exercised as a court of first instance rather than as an appellate tribunal. Because the High Court adjudicated on the liability of the debtor to the company, the jurisdiction was civil. The Court also referred to the authorities in Candas Narondas v. Navivahu & Co. (1889) 13 Bom. 520 and P.T. Munia Cervai v. The Hunuman Bank Ltd. (1958) I.L.R. (Mad.) 658 in support of its reasoning.

The judgment concerned Civil Appeal No. 198 of 1956, which was an appeal from the judgment and decree dated 24 August 1950 of the Allahabad High Court in Execution First Appeal No. 399.

The Court noted that The Banaras Bank Ltd., a public limited company incorporated at Banaras and hereinafter called “the Bank,” was ordered by the High Court of Judicature at Allahabad on 1 March 1940 to be compulsorily wound up. Following that order, the Official Liquidator was appointed to conduct the winding‑up proceedings. Subsequently, on 12 September 1942, the High Court, exercising the power granted by section 187 of the Indian Companies Act, 1913 (VII of 1913), issued an order directing the appellants, Jyoti Bhushan Gupta and Gokul Chand, whose names appeared on the list of contributors, to pay the sum of Rs 95,178 5⁄9 together with interest to the Official Liquidator of the Bank. The Court explained that this order became enforceable under section 199 of the same Act, in the same manner as a decree of the High Court may be enforced in any suit pending before it. On 12 September 1946 the High Court transferred the order to the District Judge of Allahabad for execution. Thereafter, on 23 September 1946, the Official Liquidator filed an application before the District Court, Allahabad, seeking execution of the 1942 order and requesting that certain amounts due to the appellants be attached in satisfaction of the claim. The District Judge subsequently transferred the execution proceedings to the Civil Judge, Allahabad. The appellants argued, inter alia, that the application for execution was barred by the limitation provision because it was not presented within three years of the order for payment, as required by Article 182 of the First Schedule of the Limitation Act. The Official Liquidator contended that the application was governed by Article 183 of the Act and further asserted that partial payments made by the appellants had extended the limitation period. During the hearing the Official Liquidator withdrew the alternative plea of part payment. The Civil Judge held that the execution application was time‑barred, since it had not been filed within three years of the High Court’s order.

On appeal to the High Court of Allahabad, that Court reversed the decision of the Civil Judge and remitted the matter back to the Civil Judge with instructions to restore the execution application to its original number and to proceed in accordance with the law. The present appeal was filed against that High Court order, the appeal having been granted a certificate of fitness under Article 133 of the Constitution. The Company’s counsel argued that because the High Court order was not a final decree, an appeal on a certificate of fitness issued by the High Court could not be maintained. The Court observed that, given the significance of the question raised by the appellants and the Court’s power to regularise proceedings in a suitable case, it was not necessary to entertain further arguments on the maintainability of the appeal at this stage.

Having granted special leave to proceed in this Court, the Court chose to hear the parties even though the High Court was unable to issue a certificate under Article 133 of the Constitution. The matter before the Court was first to determine whether the appeal was maintainable in the absence of such a certificate, and subsequently to consider the appeal on its merits. After hearing the submissions, the Court concluded that the appeal must fail on the merits. The Court then turned to the limitation provisions applicable to the execution application. Article 182 of the Indian Limitation Act prescribes a period of three years for filing an application for execution of a decree or order of any civil court, unless the order is covered by Article 183 or by Section 48 of the Code of Civil Procedure, 1908. Article 183, on the other hand, provides a period of twelve years for enforcing a judgment, decree or order of any court established by a Royal Charter when that court acts in its ordinary original civil jurisdiction; the period begins to run from the date on which a present right to enforce the judgment, decree or order accrues to a person capable of enforcing it. The order that the appellant sought to have executed was not issued by the High Court in the course of a trial of a suit. Rather, it was issued in the exercise of the jurisdiction conferred on the High Court by Section 187 of the Indian Companies Act, 1913. Section 3 of the Companies Act, by sub‑section (1), provides that the court having jurisdiction under the Act shall be the High Court that has jurisdiction over the place where the company’s registered office is situated. The proviso to that provision enables the Central Government, by notification in the official Gazette, to empower any district court to exercise all or any of the jurisdiction that otherwise belongs to the High Court. It was unanimously accepted that no such notification had been issued to empower the District Court at Banaras, the location of the company’s registered office, to make orders under Section 187. Consequently, the High Court remained the sole court competent to direct, under Section 187 of the Companies Act, the payment of the amount claimed from the appellants.

The counsel for the appellants argued that the authority exercised by the High Court in issuing the payment direction under Section 187 of the Companies Act, 1913, was neither an exercise of ordinary jurisdiction nor of original civil jurisdiction. According to that contention, Section 187 created a special power in the High Court, a power that could be exercised only in its extraordinary jurisdiction. To appreciate this argument, the Court examined the statutory basis for the establishment of the High Court and the terms of its Letters Patent. The High Court for the North‑Western Province, of which the Allahabad High Court is the successor, was constituted by Letters Patent dated 17 March 1866. Those Letters Patent were issued pursuant to the powers conferred by clause 16 of the Charter Act of 1861 (24 & 25 Vict. c. 104), which authorized Her Majesty the Queen to establish a High Court and to invest that High Court with such jurisdiction and powers. The Court noted that the language of the Letters Patent and the Charter Act therefore defined the scope of the High Court’s ordinary original civil jurisdiction, a scope that did not expressly include the special authority vested by Section 187 of the Companies Act. Consequently, the Court was persuaded that the order sought to be executed fell within the ordinary jurisdiction contemplated by Article 183, and that the limitation period of twelve years, rather than the three‑year period, was applicable.

Clause 9 of the Charter Act authorised the Crown to confer, upon a High Court established in any of the presidencies—namely Calcutta, Bombay and Madras—the same authority that the Charter itself provided. Accordingly, the High Courts of Calcutta, Bombay and Madras, popularly known as the Presidency High Courts, were each given, by clause 12 of their respective Letters Patent, an ordinary original civil jurisdiction that enabled them to entertain and try suits of every description, subject only to the territorial limits prescribed in clause 11. In contrast, the Letters Patent that created the High Court for the North Western Province did not invest that court with the power to entertain civil suits under its ordinary original civil jurisdiction. Counsel for the appellants therefore argued that article 183 applied solely to decrees and orders issued by High Courts established by the Royal Charter, because those courts were constitutionally authorised to hear civil suits in the ordinary civil jurisdiction. Since no such ordinary civil power had been conferred on the Allahabad High Court, the appellants contended that the order which the respondents sought to enforce had not been passed in the exercise of ordinary original civil jurisdiction. It was acknowledged that, at the time the Letters Patent were originally issued, the High Court possessed no jurisdiction under any company‑law provision of the type later exercised, a point that the appeal was called upon to determine. Nevertheless, clause 16 of the Charter Act and clause 35 of the Allahabad High Court’s Letters Patent provided that jurisdiction not initially vested in the High Court could later be conferred by legislation within the competence of the Governor‑General in Council and the Governor‑in‑Council. By virtue of the Companies Act of 1913, the High Court was subsequently invested with the power to order payment of amounts due by debtors of companies that had been ordered to be wound up. This power could be invoked as a matter of right against every individual whose name appeared on the list of contributors.

The Court observed that the jurisdiction created by the Companies Act was ordinary, because it did not depend on any extraordinary action by the High Court, and it was original in nature, since the petition for the exercise of that jurisdiction could be presented to the High Court as a court of first instance rather than as an appellate body. Moreover, section 187 of the Act did not confer any special jurisdiction; the High Court merely adjudicated on the civil liability of a debtor to pay sums owed to the company. Under normal circumstances, a creditor would have to institute a suit to enforce a debt, but section 187 empowered the High Court to determine liability and issue a payment order in a summary proceeding. The Court held that this statutory empowerment did not alter the fundamental character of the jurisdiction exercised by the High Court. Consequently, the contention that the authority to order payment under section 187 was not a jurisdiction but a mere power was rejected as lacking substance.

In this case, the Court observed that the authority conferred by section 3 together with section 187 of the Companies Act is not merely a power of the High Court but constitutes jurisdiction. Accordingly, the High Court possesses jurisdiction to order the payment of an amount owed by a contributory, and any order directing such payment is issued in the exercise of the jurisdiction vested in the High Court by those provisions. The Court referred to the decision of the Judicial Committee of the Privy Council in the matter of Candas Narondas Navivahu and C. A. Turner, reported in I. L. R. (1889) 13, Fam. 520, which had been called upon to ascertain the nature of the jurisdiction exercised by the High Court of Bombay in relation to insolvent debtors. The Privy Council held that article 180 of Schedule II of the Indian Limitation Act XV of 1877, which corresponded to article 183 of the Indian Limitation Act 1908, applied to a judgment of a Court granting relief to insolvent debtors entered in the High Court pursuant to section 86 of the Statute 11 and 12 Vict., c. 21. The Committee pronounced that although a Court exercising insolvency jurisdiction determines the substantive issues concerning the insolvent’s estate, the execution proceedings and the resulting judgment remain within the purview of the High Court. The judgment is entered in the ordinary course of the duty imposed upon the High Court by law, not by any special or extraordinary action, but as an exercise of its ordinary original civil jurisdiction. Lord Hobhouse, delivering the judgment of the Judicial Committee, noted that counsel argued that the jurisdiction, although civil and original, was not ordinary and cited passages of the Charter that purported to divide jurisdiction into four classes—ordinary original, extraordinary original, appellate, and special matters subject to separate provisions. The judges, however, expressed the view that the term “ordinary jurisdiction” embraces all jurisdiction exercised in the ordinary course of law without the need for a special step, and that it is opposed to extraordinary jurisdiction, which the Court may assume at its discretion on special occasions and by special orders. They observed that the subsequent clauses describing the law to be applied by the Court did not present a four‑fold classification but rather a three‑fold one: ordinary, extraordinary, and appellate. Consequently, the 1868 judgment was entered by the High Court not by way of special or discretionary action but in the ordinary performance of its statutory duty, consistent with the ordinary original civil jurisdiction of the High Court.

The Court observed that clause 18 of the Letters Patent conferred insolvency jurisdiction on the High Court of Bombay, whereas the same clause gave the High Court of Allahabad no jurisdiction over companies, and consequently the principle in In re‑Candas Narondas could not be applied. It further explained that clause 18 directs that a judge or judges of any High Court must sit as a court for the relief of insolvent debtors, and that the powers and authorities relating to original and appellate jurisdiction are to be determined by reference to the law governing insolvent debtors. The Court noted that the power to deal with claims of companies ordered to be wound up is derived from the Indian Companies Act, and that to that extent the Letters Patent are modified by that special legislation. Nevertheless, the Court held that there is no distinction in character between the original civil jurisdiction conferred by the Letters Patent and the jurisdiction created by special Acts. When, exercising authority granted by a special statute, the High Court, as a court of first instance, declares a person liable to pay a debt, that exercise is an original civil jurisdiction, and if no preliminary discretionary step is required, that jurisdiction is ordinary. The Court then referred to the decision in P. T. Munia Servai v. The Hanuman Bank Ltd., Tanjore, reported in 1 L.R. (1958) Mad. 685, where a Division Bench of the Madras High Court held that under the Banking Companies Act 1949 the court’s power formed part of its ordinary civil jurisdiction within the meaning of Article 183 of the Limitation Act, and that an order issued in that ordinary original civil jurisdiction was governed by Article 183, not by Article 182. In that case the Official Liquidator of the Hanuman Bank applied for a direction that the appellant, Munia, pay certain sums by a specified date, and the Court applied Article 183 to the enforcement application. The Court affirmed that the High Court was correct in holding that the execution application filed by the Official Liquidator was within the limitation period. Consequently, the appeal failed, was dismissed, and costs were awarded to the respondent.