Haroon Moten (Appellant)
Mahaluxmi Bank Ltd. & ors. (Respondents)
Kemaluddin Hossain CJ
Fazle Munim J
Badrul Haider Chowdhury J
Shahabuddin Ahmed J
June 25, 1980.
The Banking Companies Ordinance 1962 (LVII of 1962), section 73 Legislative intent behind this special enactment appears to enable a Banking Company in liquidation to file a suit or making an application to protect its interests by overcoming any bar of limitation under the ordinary law and for that purpose this law excluded the period from the presentation of an application for the winding up to the institution of the suit in computing the period of limitation. This provision being a special provision of law must take effect not with standing anything contained in any other law. If a banking company can take benefit of this provision for filing a suit it is quite understandable that this benefit will be available to make an application for addition of parties to the suit………………….(9)
Cases Referred to-
Official Receiver and Official Liquidator, Pass Bank Ltd. Vs. Nabadwip Chandra Fodder, 27 DLR (AD) 133; AIR 1936 A11.858, 15-IC 551 and LLR 39 Mad, 645; 9 DLR 1.
Hamidul Huq Chowdhury, Senior Advocate (Abdus Subhan and B. Hossain Advocates with him) — For the Appellants. K.A. Bakar, Senior Advocate, (A Saleque and A.W. Mallik, Advocates with him)—For the Respondent.
Civil Appeal No. 160 of 1979
Shahabuddin Ahmed J. — This appeal by special leave arises from a judgment and decree of the High Court Division in Letters Patent Appeal No. 4 of 1967 confirming that of the trial Court in Transfer Suit No.1 of 1965.
2. Mahaluxmi Bank Limited (In Liquidation) filed the suit against Haroon Moten and Alia Rakhi Bai (Defendents Nos. 1 and 2 respectively) on 9th August, 1960 in the First Court of Subordinate Judge, Chittagong, where it was registered as O.S. No. 28 of 1960. It was transferred to the High Court on 29th March, 1965 under the Banking Companies Ordinance 1962. Defendent No.3 was impleaded on 8th March, 1966.
3. The plaintiff was a Banking Company carrying on banking business with its principal office at Terri Bazar, Chittagong. But on account of its failure to transact the Banking business and inability to meet the demands of its creditors the bank closed its business and sought moratorium from the High Court and for that purpose submitted a Scheme of Arrangement duly approved in a general meeting of the creditors. The Court sanctioned the Scheme of Arrangement by an order dated 4th August, 1950 and allowed the moratorium in terms of the Scheme of Arrangement, but the bank still failed to improve its position and could not implement the Scheme. Its banking business was totally stopped under an order of the State Bank. The Scheme of Arrangement expired on 6th June, 1954 and the Bank’s prayer for extension of time was rejected by the High Court. Ultimately, on an application filed by the creditors the bank was wound up by an order of the High Court dated 18th March, 1960, An Official Liquidator appointed by the High Court took charge of the affairs of the Bank. The Liquidator, on enquiry, came to learn that N. L. Sinha, who was appointed by the Board of Directors as Director in charge of the bank under the Scheme of Arrangement, executed two Deeds of lease in favour of Defdt Nos. 1 and 2 transferring certain immovable property of the bank on 14.6.1954 for a total consideration of Rs. 21.000/-. This property measuring 18.77 acres of land, as shown in Schedule 2 of the plaint, had been purchased by the Bank in Mortgage Execution Case No. 63/44 and Mortgage Execution Case No. 51/52 against the judgment-debtor, one Madhavi Lata Lala. N. L. Sinha also sold away the rent receiving interests of this demised property by executing two Deeds of Conveyance on 26.6.54 in favour of the brother of Defendant No.1 and another. The official liquidator further learnt that when the sale in Mortgage Execution Case No. 51 of 1952 was set aside at the instance of the judgement-debtor Madhabi Lata in Misc. Case No. 2 of 1953 the lessee, Deft. No.1, instituted Money Suit No. 5 of 1957 for refund of the proportionate share of the consideration money of the lease alleging that the Bank lost its title in 8-annas’ share of the demised property and also that the Bank has not acquired any title in R.S. Plot No. 2956 though it was included in the Lease-Deeds. This suit was decreed on 14.2.59 and in execution of the decree, another property of the bank, namely the land shown in Schedule 1 with a two storied building thereon was sold on 10.11.59 in Execution Case No. 25 of 1959 to Defdt. No.3, father of Defendant No.1, for a paltry sum of Rs. 17,517/- though this property valued over of lakhs of rupees. The plaintiff bank, represented by the Official Liquidator, alleged that the two lease deeds were fraudulent and collusive executed by N. L. Sinha who had no authority to transfer any property of the Bank and who, taking advantage of the chaotic condition of the Bank, misappropriated the entire consideration Money. It was further alleged that the decree in Money Suit No. 5 of 1957 and the sale in execution of the decree were also brought about in the same fraudulent and collusive manner causing great loss to the Bank. The plaintiff therefore, prayed, among other things, for setting aside the decree in money suit No. 1957 dated 14.2.59 as well as the sale held on 10.11.59 in execution of the decree.
4. Defendants 1 and 2 contested the suit by filing a joint written statement denying the allegations of fraud and collusion. They contended that the suit was barred by limitation, principles of waiver, estoppel and acquiescence, res judicata and non joinder of parties. It was contended that N. L. Sinha was given full powers by the Zonal Board of Directors including power to transfer any property of the bank, that the lease deeds were executed after thorough enquiry and press advertisements and prolonged negotiations, that the consideration received was duly credited to the Bank’s Account that the Money Suit No. 5 of 1957 was hotly contested by the Bank and it was rightly decreed when it was found that the Bank had no title to the property leased out and that the legal formalities. Defdt. No.3, the auction-purchaser, contested the suit by filing a separate written statement taking similar grounds and pleading bonafide purchase without notice.
5. The trial court framed a number of issues including an issue about the alleged fraud and collusion in the matter of execution of the two lease deeds, and on consideration of the evidence, rejected the contentions of the defendants and held that the lease deeds were executed, the decree in Money Suit No. 5 of 1957 was obtained, and the sale in execution of the decree was brought about by fraud and collusion, and on these findings, decreed the suit declaring the decree null and void and setting aside the sale. The High Court Division in appeal did not find any illegality in the trial court’s decree.
6. Leave was granted to consider the following questions:
1. Whether the suit as framed by the plaintiff-respondent was in terms of Order 6, Rule 4 of the Code of Civil Procedure and also bad for mis-joinder of causes of action.
2. Whether the claim of the plaintiff was barred both as regards the money decree and consequential auction-sale and whether the addition of auction purchaser in the money sale was barred and Section 73 of the Banking Companies Ordinance, 1962 was applicable;
3. Whether the suit was barred by res-judicata;
4. Whether the orders of Courts below have in effect set aside the leases as a whole, part of which was not under challenge.
7. Mr. Hamidul Huq Chowdhury, learned counsel for the appellant, Defendant No. 1 (No appeal has been filed by Defendants Nos. 2 and 3) has contended that no specific allegation of fraud and collusion was made in the plaint and no particulars of any fraud were given in the plaint, in terms of Order 6, Rule 4 C.P.C. and as such, “the suit as framed and the evidence led for the plaintiff do not comply with the requirements of law.”
On perusal of the plaint we find that this contention is not borne out by facts, Paragraphs 6 and 11 of the plaint have been specifically devoted to the allegations of fraud and collusion. It has been stated in the plaint that Mr. N. L. Sinha, acting in collusion with the previous Directors of the Bank and the Manager who was his puppet, made the transfer for his personal gain and that the Bank Officials did not properly contest the Money Suit No. 5 of 1957. In fact, allegation of fraud and collusion was made not only in respect of the Money decree and the sale but also in respect of the leases.
8. Next contention is that the suit was barred by limitation, particularly against the added Defendant No.3, the auction purchaser who was impleaded in March 1966 i.e. years after the filing of the suit and 7 years from the time when the cause of action arose in this case that is when the decree was passed. Decree in Money suit No. 5 of 1957 was passed on 14.2.59, sale was held on 10.11.59 and the plaintiff claimed to have known of the matters on 30.7.60. It appears, under the general law of limitation, namely Article 95 of the Limitation Act the suit was filed within the period of limitation of 3 years not only from the date of knowledge as claimed but also from the date of the decree. But the application for addition of party was filed on March 3, 1966, but for any special law of limitation the application was barred. The suit is, however, governed by a special provision as to limitation, namely S. 73 of the Banking Companies Ordinance, 1962 which came into force from July 1962. This section provides for a special procedure for computing the period of limitation for a suit on an application filed by Banking Company facing liquidation.
Sub-Section (1) of S.73 provides:- “S. 73. Special period of limitation.-
Sub-section (1) Notwithstanding anything to the contrary contained in the Limitation Act 1908(IX of 1908) or in any other law for the time being in force, in computing the period of limitation prescribed for a suit or application by a Banking Company which is being wound up the period commencing from the date of the presentation of the petition for the winding up of the banking company shall be excluded.”
In pursuance of this provision of law the trial court excluded the period from 25.8.59 when the petition for winding up the bank was presented, to 6.3.66 when the application for addition of party to the suit was made in computing the period of limitation. Mr. Chowdhury has expressed doubt whether S. 73 is applicable to an application for impleading a party. But the language of S.73 is wide enough to include any application by a Banking Company under liquidation. Main contention is that the plaintiffs right to sue Defdt. No.3 was barred by the ordinary law and as such this right was extinguished before Defdt No.3 was impleaded; this right which was extinguished could not be revived by subsequent change of law providing for a longer period of limitation. Mr. Chowdhury has placed reliance upon a number of decisions in support of this proposition of law, such as AIR 1936 A11.858, 15-IC 551 and LLR 39 Mad, 645. In all these cases, it appears, the right to sue was barred under the existing law long before the change in law took place providing for different period of limitation. But in the instant case S. 73 of the Banking Companies Ordinance as well as the Ordinance itself came into force in July, 1962 when the plaintiffs right to sue under the ordinary law was still alive and was not extinguished. There is, therefore, no question of revival of a right destroyed.
9. On behalf of the respondent reliance has been placed on 27 DLR (AD) 133, “Official Receiver and Official Liquidator, Pass Bank Ltd. Vs. Nabadwip Chandra Fodder“, in that case this Division considered the retrospectively of section 73 and held:
“Section 73 have provided a special period of limitation notwithstanding anything to the contrary contained in the Limitation Act, 1908 or in any other law for the time being in force. It has thereby extended the period of limitation as provided either in Article 57 or Article 85 of the First Schedule of the Limitation Act. Now the question is whether the operation of the Limitation Act was halted or stopped so far as the present case is concerned. The provisions of sub-section (3) of section 73 are so wide that they bring in their ambit any Banking Company in respect of which a petition for the winding up has been presented before the commencement of this Ordinance.”
Legislative intent behind this special enactment appears to enable a Banking Company in liquidation to file a suit or making an application to protect its interests by overcoming any bar of limitation under the ordinary law and for that purpose this law excluded the period from the presentation of an application for the winding up to the institution of the suit in computing the period of limitation. This provision being a special provision of law must take effect notwithstanding anything contained in any other law. If a banking company can take benefit of this provision for filing a suit it is quite understandable that this benefit will be available to make an application for addition of parties to the suit. We, therefore, find that the question of limitation has been correctly decided in this case by the High Court Division.
10. The next point urged by Mr. Chowdhury is that the suit is bad for mis-joinder or causes of action in that the suit was filed for declaration of nullity of the decree in Money Suit No. 5 of 1957 and the resultant sale, but an issue was framed as to whether the lease deeds were fraudulent and collusive. The lease, it has been pointed out, relates to Schedule 2 land consisting of a few plots in Mouza Chandpur, but in execution of the decree in the Money Suit a different land namely, Schedule 1 with a two storied building thereon in Mouza Katalganj was sold. When Issue No. 6 as to whether the lease was fraudulent was framed and evidence was adduced thereupon no cross objection was filed. The lease was the basis of the subsequent fraud and collusion also as alleged in the plaint. Money Suit No. 5 of 1957 us not unconnected with the lease. It is for the refund of the consideration of the lease that the Money Suit was filed and decree was obtained. The decree is for refund of half the premium of the lease on the ground that the lessor had no title to half of the land leased. The suit therefore is not bad for mis-joinder of ca uses of action.
11. It has been next contended that N. L. Sinha Director-in-charge got power and authority from the Article of Association of the Bank to run the Bank’s affairs and in exercise of that power and authority he had made an Agreement with the defendant on 31.7.53 for the lease and then executed the lease-Deeds. The Agreement having been made and the lease Deeds having been executed on behalf of the Bank in accordance with the provision of Ss. 88 and 99 of the Companies Act the contract and the lease are binding upon the Bank and are legally enforceable. Reliance has been sought from 9 DLR 1, in which it was held:
“Persons dealing with Directors or Managing Directors of a Company arc not called upon to enquire whether the Directors have been validly appointed or whether there is a specific resolution authorising them to do a particular act, if it is clear from the Articles of Association of the Company that they could have been authorised to do the said act.”
This decision does not help the appellant, for N. L. Sinha, Director-in-charge, acted under the Scheme-of Arrangement from which he derived his power and authority. Articles of Association were subject to the Scheme of Arrangement which required him to seek prior approval of the Board of Directors for any transfer of the Bank’s properly and this power and authority did not extend beyond the period of the Scheme of Arrangement. The lease Deeds were executed two weeks after the expiration of the terms of the Scheme of Arrangement and so ultra vires his Power. The Bank is therefore not bound by the transfer.
12. It has been contended that the finding of fraud and collusion is not based on sufficient evidence; rather it is based on surmises. This contention hardly contains any substance for; there are sufficient, materials for arriving at the finding as to fraud and collusion. N.L. Sinha got no authority to make the transfer without prior approval of the Board of Directors; he executed the lease-deeds when the Scheme of Arrangement already expired. The transfer was made when F.M.A.No.69. 69 of 1955 for setting aside the sale in Mortgage Execution Case No. 51 of 1952 was pending and as such the transfer is hit by the Doctrine of Lis Pendens also so far as half of the property representing Madhabi Lata’s share is concerned. Against, R.S. Plot No. 2956 was in fact purchased by the Bank from the judgment-debtor Madhabi Lata who got the entire property of Sarada Kripa Lala by gift and was referred to in the Sale Certificate as a C.S. Plot, but when in the money suit it was alleged that this plot was not included in the sale-certificate, no attempt was made by the Bank’s officials to ascertain its position by relay and measurement. Defendants failed to show that the amount of Rs. 21, 0007/- being premium of the lease though entered in the Register, was in fact credited to the Bank’s Account. Abnormally low premium of the lease and equally low sale-proceeds were prime facie evidence of fraud. The finding of facts has, therefore, got reasonable basis and based on evidence on record.
13. As to the auction purchaser, Defendant No. 3, the High Court is found to have rightly rejected his plea of bonafide purchase as evidence shows that he being father of Defendants No.1, residing in same house and having no independent income, was in the picture all along. The question of res Judicata, because of the judgment and decree in Money Suit No. 5 of 1957, has not been pressed and we think rightly.
14. As to whether orders of the Courts below have in fact set aside the leases as a whole, there can be no doubt that the leases forming parts of the same transaction by fraud and collusion will fall together being void ab initio.
In the result, the appeal is dismissed with costs.
Source : 41 DLR (AD) (1989) 8