P L D 1976 Karachi 85 (PLP)

DORAB PATEL, J.-This is a Letters Patent Appeal against the order of a learned Single Judge of this Court dated 21-8-1967 by which that Judge reviewed and modified the orders passed by him on the 1st April, 1963 and on the 13th April, 1964 in the winding up of the second respondent. The appellant was the Managing Director of the second respondent which was a Private Limited Company incorporated under the Companies Act, 1913. I say "was" because this respondent was held by a Division Bench of this Court in Progress of Pakistan Co. Ltd. v. Registrar, Joint Stock Companies, Karachi (P L D 1958 Lab. 887) to be an undesireable Company within the meaning of the Undesirable Companies Act, 1958 (hereafter called the said Act), therefore it should have ceased functioning on the 21st October, 1957 and in the events that happened, the first respondent filed a petition in this Court under section 6 of the said Act for its winding up. As prescribed in that section, the Official Assignee of this Court was appointed the Official Liquidator of the second respondent and thereafter the provisions of the Companies Act, 1913 were applicable to these winding up proceedings. Accordingly, the Official Liquidator filed an application under section 185 of the Companies Act, and one of the payment's recommended by him to the Court in this application was a recommendation for the payment of Rs. 200 per month to the appellant as the appellant's remuneration for the Management of the second respondent after 21-10-1957. But the second respondent should have ceased to function on 21-10-1957, and its functioning after this date was totally illegal under section 4 of the said Act which reads as follows;

"

4. Existing undesirable companies to functioning. (1) Every undesirable company existing immediately before the commencement of this Act shall, on such commencement, cease to function and, notwithstanding anything in the Companies Act, 1913, or in any other law for the time being in force, shall be wound up and dissolved in the manner provided in this Act. (2) Any transaction with an undesireable company or with any officer or agent acting for or on behalf of such company shall be void. (3) Any officer or agent acting for or on behalf of any such company who, on or after the commencement of this Act, carries on, or attempts to carry on the business of the company shall be punishable with imprisonment for a term which may extend to three years or with fine or with both. On the plain language of this section, the appellant should have been prosecuted for continuing to manage the second respondent after its function ing had become illegal, yet perhaps because the second respondent had made profits after this date, he had demanded remuneration at Rs. 925 per month because this was the remuneration provided in the second respondent's Articles. Conscious as the Official Liquidator was of the illegality of this claim, he first pointed out that the appellant "does not appear to be entitled to the remuneration/salary claimed", then he recommended that the salary of Rs. 200 per month could be paid to the appellant from November, 1557 till May, 1961 totaling Rs. 8,

600. The recommendation thus made was disposed of by a learned Single Judge of this Court by his order of 1-4-1963. The learned Single Judge pointed out in paragraph 3 of his order that the functioning of the second respondent was illegal after 21-10-57. He then referred to the financial position of the second respondent in paragraph 4 of his order and recorded the submissions of the appellant. He, therefore, fixed his remuneration at Rs. 500 per month, and the amount thus required to be paid to the appellant amounted to Rs. 21,

500. The proof of this claim was accepted in due course by the Official Liquidator and when the matter was again put up to the learned Single Judge for orders, by his order of 13-4-1964, he directed the payment of this amount of Rs. 21,506 to the appellant. Emboldened by his success in obtaining payment for services which were prohibited by the said Act, he advanced fresh claims, which were put up before the same learned Judge who, however, ordered notice to Mr. G. Raymond. Advocate to assist him as amicus curiae. Mr. Raymond appears to have pointed out to the learned Single Judge that his orders of 1-4-1963 and 13-4-1964 were in contravention of the mandatory provisions of section 4 of the said Act. In this situation, the Official Liquidator was directed to submit a fresh report, and it is sufficient to state here that on 30th January, 1965 he filed an application before the same learned Judge under Order XLVII, rule 1, C P.C. for the review of his earlier orders dated 1-4-1963 and 13-4-1964. By his order dated 21-8-1967 the, learned Single Judge held that he was not competent to review his orders under Order XLVII, rule 1 C. P. C. However, he held that he was entitled to set them aside both under section 151, C. P. C. and under section 202 of the Companies Act, and also because the orders sought to be reviewed were only administrative orders. As the appellant was thus deprived of the payment of Rs. 21,500 which had earlier been sanctioned to him, he filed a Letters Patent Appeal against this order, and we have heard this appeal with the able assistance of Mr. Sharifuddin Pirzada, who appeared as amicus curiae.

2. All the learned counsel admitted that the Review Application was time barred. That is obvious from the facts stated, but the Official Liquidator had filed an application for condoning delay under section 5 of the Limitation Act. The delay was gross, and the only ground given for condoning it was that the legal implications of the said Act had not been clearly understood. That may be so, but the provisions of section 4, which I have quoted. are very clear, and as there is no ambiguity whatsoever in the section, sufficient cause was not made out for condoning the delay in filing the Review Application. Accordingly, on this ground alone, it merited dismissal, and I would refrain from examining the further ground given by the learned Single Judge for the view taken by him in the impugned order.

3. I would now examine whether the learned Single Judge was competent to set aside his earlier orders under section 151 of the C. P. Code, and the only reason given by him for doing so was that the Official Liquidator had not drawn his attention to the full implications of the said Act. With the utmost respect, I have to point out that this criticism of the Official Liquidator is hardly consistent with paragraph 3 of the Court's order of 1-4-1963. Secondly, it was the Court s duty to construe the said Act. Accordingly even if it is assumed that the Official Liquidator had erred in the construction placed by him on the said Act, this could not alter the obligation on the Court to construe it correctly. How then could the Official Liquidator's mistake, if any, be a ground for changing orders which had become final? In my humble opinion, excluding perhaps very special cases, as for example matters affecting minors, if section 151 could be availed of in the manner in which the learned Single Judge has resorted to it, there would be no finality to litigation, and the sanctity of judgments would be destroyed. That is obvious, and Mr. Sharifuddin Pirzada, therefore, submitted that, although the impugned order was not clear, the learned Single Judge might have set aside his earlier orders on the ground that they were without jurisdiction. The learned Single Judge has not said so, but as some of the judgments referred to by him are on the effect of orders without jurisdiction, it is possible that he was of the opinion that his earlier orders were without jurisdiction. In this view of the matter, the question is of the nature of the error in those earlier orders. That error is that the provisions of the said Act were totally misread. But a Court which has the jurisdiction to decide a case has the jurisdiction to decide it wrongly, and merely because the erroneous decision was due to a mistake of a type which fortunately occurs seldom would not mean that the decision was without jurisdiction. I am fortified in my opinion, by a judgment of the Supreme Court in the Chittagong Chamber of Commerce & Industries v. C. S. Limited (P L D 1970 S C 132). There the contention was that the orders of the East Pakistan High Court were without jurisdiction because they had misconstrued sections 10 and 12 of the Companies Act. In repelling this contention Sattar, J. observed at page 137; "By no stretch of imagination, even if the contention of Mr. Abdulla that the order was contrary to the provisions of sections 10 and 12 of the Companies Act were to be accepted, it can be urged that the order is a nullity. At the highest it is an illegal order but not a void order. The Court had jurisdiction to confirm the deletion of the original clauses 4 and 7 of the objects and if in so doing it either misinterpreted or ignored any provision of the law, the order cannot be said to be void. An illegal order has to be avoided by challenging it in proper proceedings and until it is set aside, it cannot be ignored." I am in respectful agreement with these observations, and I am completely unable to accept the view that the earlier orders of the learned Single Judge, in the instant case, were a nullity. Accordingly, they should have been challenged in a Letters Patent Appeal. But because the parties, through their negligence, allowed these orders to become final would be no ground for setting them aside under section 151 of the Civil Procedure Code. Now, in taking a contrary view, the learned Judge observed that the power under this section was to be availed of in order to further the ends of justice. With e respect, I am not aware of any case nor was any case cited, in which this section has been utilised to set aside an erroneous order merely because the parties concerned had been too negligent to challenge it in an appeal, and I am not able to agree with the learned Single Judge's construction of the section.

4. But, as I pointed out, the learned Single Judge was also of the view that he was entitled to set aside his earlier orders in the exercise of his powers under section 202 of the Companies Act, 1913. This section reads; "

202. 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." The marginal note to the section states: "Appeals from orders". Mr. Sharifuddin Pirzada relied on it because from an analysis of the section it is clear that it throws light on its meaning. However, as the Legislature has used the words "re-hearings" and "appeals", the learned Single Judge was of the view that these words were inserted deliberately in the section so as to confer a right of re-hearing and a right of appeal. In this connection, the learned Single Judge also relied on the fact that the word "re-hearing" in Order XLVII of the C. P. C. meats a hearing before the Court whose order is sought to be reviewed and not the re-hearing which might be involved in First Appeals. I may further add that the word "re-hearing" has been used in the same sense in Order XLI, rule 21 of the Civil Procedure Code, and as the Legislature is presumed to be aware of the law, the construction placed on the section by the learned Single Judge is at first sight a possible and reasonable construction. It is true that it is inconsistent with the marginal note to the section, but that is only a circumstance against the view of the learned Single Judge, and perhaps not an important circumstance at that.

5. However, the implications of the view taken by the learned Single Judge would be, to say the least, somewhat disturbing. Thus, on the footing that the section contains two remedies, it does not contain any restriction or regulation on the two remedies thus prescribed. Now, an application for re-hearing could only fall under Article 181 of the First Schedule of the Limitation Act. As this Article prescribes a period of three years on the view taken by the learned Single Judge, an aggrieved person could first file an appeal against the decision of the trial Court, and in the event of his being unsuccessful in that appeal, he might still have time to apply to the trial Court for a re-hearing of the order by which he was aggrieved. Now, if this application were allowed, which would be the order that would be final ? In my humble opinion, the consequences of the view taken by the learned Single Judge would lead to absurdity, and such absurdity cannot be attributed to the Legislature. Secondly, as submitted by Mr. Sharifuddin Pirzada, the latter part of the section prescribes the manner in which proceedings under the section are to be conducted. Therefore, on the view taken by the learned Single Judge, the re-hearing would be "subject to the same conditions in and subject to which appeals may be heard from any order or decision of the same Court in cases within its ordinary jurisdiction. But in the case of this Court, an appeal against an order or decision of a Judge of this Courts "within its ordinary jurisdiction" could only be heard by a Division Bench- ID Therefore, the re-hearing contemplated under the section can only be before Division Bench, and this would suggest that the word "re-hearing" in the section was redundant. That was also the conclusion reached by S. R. Das, J. in a most well-considered judgment (I say so with respect) In re The Indian Companies Act and In re : East India Cotton Mills Ltd. (A I R 1949 Cal. 69) after a careful examination of the history of the section, which necessarily included an examination of the history of the corresponding provisions of the various English Companies Acts. However, as the learned Single Judge reached the opposite conclusion on the basis of his analysis of the history of the section, I would first examine it, and I am grateful to Mr. Sharifuddin Prizada for his assistance on this question.

6. Section 202 of the Companies Act, 1913 corresponds with but is not identical to section 169 of the Companies Act, 1882. But this section 169 B of the Companies Act, 1882 was a verbatim reproduction of section 149 of the Companies Act, 1865 which in turn was mainly based on the English Companies Act, 1862. It is, therefore, sufficient to quote here section 169 of the Companies Act, 1882 which reads as follows: "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 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 ; subject to this restriction, that no such re-hearing or appeal shall be heard unless notice of the same is given within three weeks after any order com plained of has been made, in manner in which notices of appeal are ordinarily given under the Code of Civil Procedure, unless such time is extended by the Court of Appeal." The only difference between this section and the present section 202 is that the present section 202 does not contain the provision about limitation beginning with the words "subject to this restriction". I may pause here to point out that, as this restriction on the period of limitation has been removed in the present section 202, it has rendered this section even more anomalous. It is also to be noted that the words "unless such time is extended by the Court of Appeal", which were contained in section 169, were totally inconsistent with the view that the section conferred in addition to a right of appeal a right to approach the trial Court for setting aside its order. Thus it is the changes in the Companies Act, 1913 which have made section 202 extremely anomalous. But, according to the learned Single Judge, there was no anomaly in the section, because the intention of the Legislature was to follow the English law, and further, according to the learned Single Judge, the English law conferred both a right of appeal and a right of re-hearing against orders passed in winding up proceedings. It is, therefore, necessary to examine the English law, but at the outset, I may observe that sweeping changes were made in England by the Judicature Act of 1873, and the attention of the learned Single Judge does not appear to have been drawn to this Act.

7. I would begin with the English Companies Act of 1862. As I pointed out, section 124 of this Act corresponded to section 149 of our Companies Act of 1866 and to section 169 of our Companies Act of 1882. But unlike the powers of the Courts in the Sub-Continent, at this time in England, a litigant in the Chancery Courts had a right of appeal to a superior Court as well as a special type of appeal to the same Court which was known as a re-hearing. This is important, because the Chancery Courts were the Courts which generally had jurisdiction in England under the Companies Act. However, the structure of the English Courts was completely altered by the Judicature Act of 1873, and the question whether this Chancery practice of a re-hearing survived the changes made by the Judicature Act was examined by Jessel M. R. In re St. Nazaire Company (12 Ch. D 1879). In this classic judgment, the Master of the Rolls examined the old practice of the Chancery Courts and held that it had been abolished by the Judicature Act. I will presently revert to this judgment, but I would further observe here that Parliament is presumed to be aware of the judgments of the superior Courts, and the view of Jessel M. R. was obviously accepted by Parliament when it repealed the Companies Act of 1862 and promulgated the Companies Act of 1909. The provision in this Act corresponding to section 124 of the 1862 Act was section 181, subsection (1) of which read; "Subject to rules of Court, an appeal from any order or decision made or given in the winding-up of a company by the Court under this Act shall lie in the same manner and subject to the same conditions as an appeal from any order or decision of the Court in cases within its ordinary jurisdiction." Thus the word "re-hearing", which was contained in the repealed statute, was deleted, and the view of Jessel M. R. was enshrined in the statute. As pointed out by Mr. Sharifuddin Pirzada, this English Companies Act of 1908 was also repealed, but in all subsequent enactments the word; "re-hearing" was not to be found, except for very limited jurisdictions, which are not relevant. Now I agree with the view of the learned Single Judge that our Legislature intended to follow the English law. But, although the word "re-hearing" was deleted from section 181 of the English Companies Act, 1909, it is nonetheless to be found in section 202 of the Companies Act, 1913. Does this mean that the Legislature intended to make a departure from the English law, or does it only mean that the word "rehearing" was the result of careless drafting ? In orders to decide this question, it is necessary to examine the English practice both before and after the Judicature Act, and as the practice before the Judicature Act has been very lucidly stated by Jessel M. R. In re : St. Nazaire Company, I would now turn to this judgment.

8. Jessel M. R. observed at page 97; "Then it was said that under the old practice the Court of Chancery, that is, the Judges of the Court of Chancery, the Lord Chancellor, the Master of the Rolls, and the Vice-Chancellor could re-hear not only their own decrees, but the decrees of their predecessors, that is, those whom they succeeded. No doubt it was so .... The power to re hear was confined by General Orders. The time allowed had been 20 years, but at last it came down to 5 years." Then, as to the effect of the Judicature Act on this practice, Jessel M. R. observed; "The transfer of the jurisdiction is contained in the 16th and 17th sections of the Act of 1873 explained by the 18th. The 16th section says; 'The High Court of Justice shall be a superior Court of Record, and subject, as in this Act mentioned, there shall be transferred to and k, vested in the said High Court of Justice the jurisdiction which at the commencement of this Act was vested in or capable of being exercised by 'among other Courts', 'the High Court of Chancery as a Common Law Court as well as a Court of Equity'. Therefore, the whole jurisdiction of the Court of Chancery is transferred, . . . . subject to the next following section, which says : 'There shall not be transferred (1) to or vested in the said High Court of Justice by virtue of this Act any appellate jurisdiction of the Court of Appeal in Chancery, or of the same Court sitting as a Court of Appeal in Bankruptcy'. Now, the Court of Chancery included the Lord Chancellor no doubt, and it of course meant the jurisdiction of that Appellate Court ; but the matter is made plain by the 18th section : 'The Court of Appeal established by this Act shall be a Superior Court of Record, and there shall be transferred to and vested in such Court all jurisdiction and powers of the Courts following (that is to say) all jurisdiction and powers of the Lord Chancellor and of the Court of Appeal in Chancery in the exercise of his and its appellate jurisdiction.' Now, the jurisdiction and powers of the Lord Chancellor were undoubtedly included in the jurisdiction of the High Court of Chancery ; and if the Court of Appeal is to have the appellate jurisdiction of the Lord Chancellor and the Court of Appeal in Chancery, is it reasonable to suppose that part of the appellate jurisdiction vested in the High Court of Chancery, that is the Chancellor, who was really the High Court of Chancery, was transferred to the Judges of the High Court with the remarkable consequence I have already referred to ? I am satisfied upon a fair reading of the Act, even without reference to the Rules, we ought to come to the conclusion that the Court below has no such jurisdiction." This judgment was approved by Fry, L. J. In re : Suffield & Watts, Ex parte Brown (20 Q B D 693) and was followed by the Court of Appeal in Charles Bright & Co Ltd. v. Sellar ((1904) 1 K B 6). It has also the approval of Lindley, and I would quote here a passage from the 6th Edition of Lindley's Treatise on the Companies Act because the learned Single Judge relied on it, and because this was the last Edition on the 1862 Act. The relevant passage which is at page 895 reads; "Before the Judicature Acts, a winding-up order might have been dis charged on motion or petition by the Judge who made it, but now no Judge can rehear or alter it has been passed and entered, provided it accurately expresses the intention of the Court ; the power to rehear is part of the appellate jurisdiction and has been transferred to the Court of Appeal." With respect, I am completely unable to understand how these observa tions can lend any support to the view of the learned Single Judge ; on the contrary, they are completely inconsistent with it. Of course, the view of the learned Single Judge is supported by the English case-law before the passing of the Judicature Act of 1873. But I find it impossible to believe that the Legislature intended, through an obscure section of the Companies Act, to confer on our Courts a jurisdiction which they had not possessed, and that on the basis of a practice which had been abolished 40 years earlier in England because it had been found to be unsatisfactory.

9. However, the learned Single Judge has relied on a judgment of Knox, J., of the Allababad High Court in Mussoorie Bank Ltd. v. The Himalaya Bank, Ltd. (I L R 16 All. 54) and of Shadi Lal. J. in Ralla Ram v. Amritsar Mutual Relief Fund Ltd. (A I R 1919 Lah. 255 ). Now although in both these cases, the learned Judge relied on a decision of the Master of the Rolls In re: The National Assurance & Investment Association : Ex parte Munday (54 E R 1117 ') their attention ;,was not ,drawn to the fact that this decision had ceased to be good law in England, as held In re : St. Nazaire ; nor to the fact that the jurisdiction of the Chancery Court prior to the Judicature Act of 1873 to re-hear a case was the result of the evolution of that Court which had no parallel in the history of the Courts of the sub-continent. Therefore, in my humble opinion, the learned Judges erred in following the decision In re: The National Assurance & Investment Association Ex Patte Munday. Additionally, as to the Lahore case Shadi Lai, J. changed his view the next year. In Hindustan Bank Ltd. v. Mehrajdin (A I R 1920 Lah. 51), Shadi Lai, J. followed the observations of the Bombay High Court in Parvatishanker v. Ishvardas Jagjivandas ((1895) 19!Bom. 208) is that the re-hearing contemplated under section 169 of the then Companies Act (which corresponds to section 202 of the Companies Act, 1913) was in the nature of an appeal, and the view thus taken by Shadi Lal, J. was upheld by a Division Bench of the Lahore High Court. Accordingly, in my humble opinion, the learned Single Judge erred in following the judgment of Knox. J. in the Allahabad case and the earlier view of Shadi Lai, J. ; and the only question is whether we can treat word "re-hearing" in section 202 as redundant.

20. In my opinion, the case falls under the following passage of Maxwell in his Interpretation of Statutes, 11th Edition; "It has been asserted that no modification of the language of a statute is ever allowable in construction except to avoid an absurdity which appears to be so not to the mind of the expositor merely, but to that of the Legislature, that is, when it takes the form of a repugnancy. In this case the Legislature shows in one passage that it did not mean what its words signify in another, and a modification is therefore called for, and sanctioned beforehand, as it were, by the author. But the authorities do not appear to support this restricted view. They would seem rather to establish that the judicial interpreter may deal with careless and inaccurate words and phrases in the same spirit as a critic deals with an obscure or corrupt text, when satisfied, on solid grounds, from the context or history of the enactment, or from the injustice, inconvenience, or absurdity of the consequences to which it would lead, that the language thus treated does not really express the intention and that this amendment probably does." I therefore respectfully agree with the view of S. R. Das, J. in the Calcutta case, and in my humble opinion, the term "re-hearing" in the section is redundant.

11. The only other ground given by the learned Single Judge for review ing his earlier orders was that those orders were administrative orders and could therefore be reviewed at any time without regard to the question of limitation. Mr. Sharifuddin Pirzada submitted that the learned Single Judge had overlooked the rule of locus poenitentiae. I agree that this rule would be attracted if the orders reviewed were administrative orders. But the question is whether they were administrative orders. No doubt the procedure for determining claims in winding up proceedings may not be as elaborate as that, for example, in a suit on the Original Side of this Court. None the less, these claims are decided after hearing the parties concerned and after recording evidence, if necessary, and I may point out here that there is a whole chapter in the rules of this Court about winding up proceedings, including elaborate provisions for notice to the creditors, contributories; etc. therefore the Judge who sits as the liquidation Judge is not distributing i largesse but is administering justice according to law, and, if his order is illegal, it must be challenged in an appeal ; and here I must confess my inability to understand how an appealable order can be described as an administrative order.

12. However, the learned Single Judge has given two reasons for his opinion that his earlier orders were administrative orders. The first is that they "were made on administrative references of the Official Assignee", and the second is that they had been passed without notice to the persons concerned. As to the first reason, with the utmost respect, in my humble opinion, the term "administrative reference" is both incorrect and also begs, the question. It is true that the Official Assignee was the Official Liquidator of the second respondent. But the matter had been placed before the Court by the Official Assignee in his capacity as the liquidator, albeit the statutory liquidator, of the second respondent ; nor does anything turn on the word "reference". But as the learned Single Judge claims to have been influenced by the report of the Official Liquidator, I may point out that the submission of reports is in no way unique to liquidation proceedings. Courts appoint Commissioners to submit reports whenever it is considered necessary to do so in the ends of Justice. But I have never heard it said that a decision on a reference by a Commissioner is an administrative order. I may here draw an, analogy from a suit for accounts. After the preliminary decree has been passed, the invariable practice is to appoint a Commissioner to submit a, report, and a Commissioner submits a report after recording evidence. This report is then submitted to the Court which may accept or reject it after hearing the parties concerned. Thus, the position in such a suit is almost identical to what the learned Single Judge described as the administrative reference of the Official Assignee, yet it has never been held by any Court that a judgment finally disposing of a suit for accounts is an administrative order. Then, as to the second reason given by the learned Single Judge, the fact that he had passed his earlier orders without proper notice was another illegality in those orders, but this does not mean that the orders thereby became administrative orders.

13. No other ground has been given by the learned Single Judge for setting aside his earlier orders, nor were we referred to any other ground on which the impugned order could be supported, Accordingly, the appeal must be allowed. I have reached this conclusion with very great regret, because it means that the appellant will be able to retain his illegal earnings. But justice has to be administered according to law, and if an illegal order has been allowed to become final, it is better that it should stand than that, it should be corrected by another illegal order. However, it may be open, to the Official Liquidator or to the first respondent to take further proceedings against the appellant under the Companies Act or under the said Act, and they are free to do so, if so advised. With these observations, the appeal is allowed, but I would leave the parties to bear their own costs. I thank, Mr. Sharifuddin Pirzada for his assistance. JAMALUDDIN H. AHMAD, J.-I agree. S.Q. Appeal allowed;