Order 22 Rule 8 CPC| Delay By Liquidator To Implead Himself In Proceedings A Mere Technical Requirement, Not A Ground For Abatement Of Suit: Calcutta HC

The Calcutta High Court recently had the opportunity to expound on the principles pertaining to abatement of a suit under Order 22 Rule 8 of the Code of Civil Procedure, 1908 (CPC) involving a corporate entity that had been declared as insolvent by the National Company Law Tribunal.

Justice Shekhar B. Saraf was adjudicating upon an application seeking dismissal of the instant suit on the grounds of abatement and further direction upon the Special Officer appointed by the Court to restrain him from carrying out the valuation and sale of the concerned goods (10,000 Metric Tons of "Metallurgical Coke" hereinafter referred to as "Met Coke").

Another application had also been filed seeking necessary amendment of the plaint to bring the liquidator of the plaintiff company on record to represent it in the instant suit. Since the issues involved in both the applications emanated from the same set of facts and events, both the applications were heard together by the Court. 

Justice Saraf observed that since in the instant case, the liquidator has rendered appearance in meeting held by the Receiver and has made a constant effort to protect the interests of the plaintiff, it cannot be said that the liquidator has declined to continue the suit. It was further underscored that a mere delay on the part of the liquidator to implead himself in the instant proceedings cannot be in any manner be presumed to be an abatement of the suit.

"..it is crystal clear that the liquidator is fighting tooth and nail with regard to this litigation and a mere delay in making an application for substituting his name in the records of the suit would not in any manner lead to an abatement of the suit. In fact, in my view the liquidator has never stopped acting in the suit but has continued diligently to act in the suit for the protection of the goods in the suit which the plaintiff claims to have title on. The very fact of the presence of the liquidator in the meetings held by the Receiver indicate a constant endeavour to protect the interest of the plaintiff in this case", the Court opined. 

The Court noted that the liquidator had appeared before the Receiver with regards to the sale of ten thousand metric tons of Met Coke and had also appeared before the Single Bench and Division Bench of the Calcutta High Court with regards to the sale of the coke. Opining that a failure on the part of the liquidator to impede himself in the present proceedings is a mere technical requirements and does not constitute abatement of suit, the Court remarked further, 

"Such failure may amount to a lackadaisical approach of the liquidator but cannot under any circumstances be seen as a positive assertion to decline to continue the suit. Impleading the liquidator is a mere technical requirement and nothing more. One must keep in mind that a company that goes into liquidation may at any point of time be able to come out of liquidation and the abatement that takes place would be apropos the liquidator only and not the company."

Justice Saraf also opined at the outset that the instant case is 'a classic example of making a mountain out of a molehill' and further observed that although several arguments had been made by the concerned counsels on several points of law, not all of them are necessary for deciding the case. 

Deciding the case on 'first principles', Justice Saraf noted that upon a plain reading of Order 22 Rule 8 of the CrPC it is patently clear that in case of a company that goes into liquidation, the suit shall not abate unless the liquidator declines to pursue the said suit. It was further noted that Rule 9 under Order 22 of the CrPC also permits the iquidator and/or the company to apply for setting aside of the abatement or the dismissal of the suit under conditions provided in the said rule.

Reliance was also placed on the Bombay High Court judgment in Velji Sivji and another v. Mathuradas Haridas to enumerate upon the interpretation of Order 22 Rule 8 in a case where the company goes into insolvency. The Court also referred to the Allahabad High Court judgment in Khunni Lal v. Rameshwar and Another wherein it had been held that till an order is obtained under Order XXII, Rule 8, of the CrPC the proceedings cannot abate and must be deemed to continue.

It was further noted that in the instant case, the liquidator has been acting in the suit with reference to the movable suit property in question and has also taken all necessary steps therein. 

"Under these circumstances, I am unable to fathom as to how the Court can come to a conclusion that the liquidator has declined to continue the suit", the Court remarked. 

Thus, the Court dismissed the application seeking abatement of the suit and further allowed the application amendment of the plaint to bring the liquidator on record. 

Case Title: Concast Steel and Power Limited v. Sarat Chatterjee and Co 

Case Citation: 2022 LiveLaw (Cal) 81 

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