366Sri Lanka Law Reports(1991) 1 Sri LR
Gargial et at Vs. Somasunderam Chatty 9 N.LR. 26.
Ceylon Hotels Corporation Vs. Jayatunga 77 C.L.W S.
Fernando Vs. Dias 1980 2 S.LR. 80.
APPLICATION for Leave to Appeal from an Application in revision of the order of7.12.1989 of the District Court of Colombo.
Lakshman Kadirgamarwith M.Y.M. Faiz for 1st to 7 petitioners.
K. Kanag Iswaran, P.C. with M.Y.M Faiz for 8th petitioner company.
H.L de Silva, P.C. for respondent
Cur. adv. vult.
28 September 1990PALAKIDNAR, J.
The executive director of the Freudenberg Shipping AgenciesCompany was the respondent Peiris (hereinafter referred to asrespondent). The first to the seventh respondents are members ofthe Board of Directors of the said company. The 8th petitionercompany is also a joint petitioner in this application before this Courtfor leave to appeal from an order of the District Court of Colombodated 07.12.1989 and filed of record as P16. There is also anapplication in revision of this order. Both matters were heard together.
It would appear that Peiris (the ree oondent) was a duly appointedDirector and functioned in an executive and managerial capacity inthe petitioner Company. For reasons set out in the objections in theDistrict Court the Board of Directors (petitioners) sought to convenean Emergency General Meeting of the Company to remove therespondent from his post of Executive Director. The respondentpre-empted this move by obtaining an interim order under section213(1) of the Companies Act 17 of 1982 preventing his removal fromthe said directorship. The District Court order marked P4 dated15.09.1989 was obtained ex parte as permitted by law under the saidprovision of this Act In the petition presented to Court the respondentexpressed his fears about the oppression by the Senanayake familyin the Board of Directors. It is to be noted that five of the petitionersbear the Senanayake name.
CASenanayake and another vs. Paris (Palakidnar, J.)367
The petitioners on 9.10.1989 filed their objections to the interim orderand sought to vary or revoke the order made by the Court (P4)under section 213(3) of the Companies Act. The learned trial judgemade an order on 12.10.89 (filed marked P11) restraining therespondent from exercising his rights as a director or performing hisfunctions as an executive director or from entering the office of the8th petitioner company. This order was to remain in effect till thefinal determination of the said application. But it is of greatsignificance that this order P11 was also made ex parte although itwas made within the scope of section 213(3) of the Companies Act.The order (P11) by itself made in that form could be construed onlyas an interim order under section 213(1) of the Companies Act. Thussequentially two interim orders P4 and P11 were made by the Courtunder 213 (1) of the Companies Act which we would agree withcounsel for the respondent had the effect of completely negating theeffectiveness of P4. P11 in fact revoked the P4 order.
The petitioners for their part made an application under section 213(2) on 6.11.89 to revoke or vary P4 and it is still not decided uponby the trial Court. In their objections the petitioners have raised manyquestions of substantive law relating to the power of a director toremain in office and removal under section 185 of the CompaniesAct. The question of specific performance and consequentialdamages as the proper remedies have been agitated. These mattersdo not concern this Court for the purpose of this application. It hasto be properly inquired into under proceedings under section 213 (3)of the Companies Act by the trial Court itself to determine whetherorder P4 of 15.9.1989 should be confirmed, revoked or varied. Thisinquiry on notice is indisputably inter partes.
The respondent faced with the order of 12.10.89 (P11) applied tocourt for the revocation or variation of that order by an applicationon 5.12.89. The learned trial judge having made two interim ordersP4 and P11 ex parte, made an order dated 7.12.89 also ex parteunder section 213 (3) of the Companies Act. His order marked P16in effect varied the order P11 of 12.10.89 and stated that therespondent, could act as Executive Director so long as he actedreasonably. It is to be noted that tire petitioners were present in Courtand made submissions that this is an order which would have tobe made on notice and to be made inter partes but the learned trialjudge has stated on 7.12.89 in the order P16, "It appears to me that
368Sri Lanka Law Reports(1991) 1 Sri L.R,
an ex parte order can be given and I amend the order given by meon 12.10.89“ He ordered that the respondent could perform
the duties of an executive director so long as he acts reasonablyand fairly without obstructing the progress of the company in theaffairs and administration of the company.
These sentiments contained in the order are salutary and wellintentioned but it is the procedural legality of the order P16 that ischallenged in this Court. The gravamen of the challenge is that ithas been made ex parte in direct violation of the requirements ofsection 213(3) of the Companies Act. At the argument it wasconceded by counsel for the respondent that a correct order can bemade only after an inter partes hearing. To that extent the order P16cannot stand. However the learned counsel for respondent arguedin his submissions that the legality of the P16 order should beattacked in the tower Court itself where it was made. In principle thisproposition is correct and could be sustained if the petitioners didnot seek to challenge the order in the tower Court. But the recordleaves no room for doubt that the petitioners wished to availthemselves of an inter partes inquiry before P16 was made but thelearned trial judge has stated in explicit terms that an ex parte ordercan be given. In that impasse the petitioners were left with the onlyremedy to move in revision to this Court and seek leave to appeal.In these circumstances, it is not necessary to enter into muchdiscussion or controversy to decide that P16 cannot be allowed tostand. It is an order made without hearing the petitioners who wererespondents to that application and who were entitled under section213(2) to seek to revoke or vary that order and therefore has to beset aside.
Now we are left with the legality of order P11 which gave rise toorder P16 in the trial Court The learned counsel for the respondentargued that by same reasoning the order made by the trial Courtby P11 is a nullity in so far as it was made ex parte.
Although in the matter before this Court the order under review isthe P16 order there is force in the submission that they are relatedproceedings as P16 arose out of P11 which in turn was begottenby P4 and in the colourful illustration of the learned counsel forpetitioner all the orders "would tumble down like a set of dominoes."
CASenanayake and another vs. Peiris (Palakidnar, J.)369
On the question of the nullity of the P11 order the matter wasexamined in the light of several decisions of our Courts and EnglishCourts. In the view of Lord Denning this has lead to a wearyingdebate on whether an order by reason of its faultiness is void orvoidable, whether it stands till it is set aside or is to be regardedas never having existed at all. Vide Lovelook v. Minister of Transport(1). Our own Courts have examined this position in several cases.In Garuhamy Vs. Gunatilake (2) Gunawardana, J in a discussion onthe matter of jurisdiction as distinguished from wrong exercise ofjurisdiction held that when a Court has jurisdiction over the subjectmatter and the parties its judgment cannot be impeached collaterallyfor errors of law or irregularities in procedure.
In the instant case the order sought to be impeached was P16 andthis order under discussion P11. However it cannot be argued thatthis Court did not have jurisdiction to make an order such as P11.The Court can enter into jurisdiction as the competent court to amatter (vide section 19 Judicature Act and the view expressed bySharvananda, J. as he then was) in Wimalasinghe Vs.Jayaweerasinghe (3). It was held in the case referred to above thatif a Court which has a general jurisdiction and has in addition localand personal jurisdiction exercises such jurisdiction in anunauthorised manner the wronged party can only take the courseprescribed by law for setting matters right and if that course is nottaken the decision however wrong cannot be disturbed.
Lord Diplock in Isaacs Vs. Robertson (4) observed that thecontrasting legal concepts of voidness and voidability are inapplicableto orders made by a Court of unlimited jurisdiction. An order madein the course of contentious litigation is either irregular or regular. Ifit is irregular it can be set aside by the Court that made it uponapplication to that Court, if it is regular it can be set aside only byan appeal court to which an appeal lies.
We hold the view in the light of this discussion that P11 was anorder made within jurisdiction of the court. By the same reasoningwith regard to the P16 order it has to be made inter partes. Butunder the cloak of an interim order under 213(1) of the CompaniesAct it has been made ex parte and has come to stay. Thisirregularity can be set aside only by an application in the court thatmade it. The respondent did not make an application in the firstinstance to obtain the P11 order after an inter partes inquiry.
Sri Lanka Law Reports
(1991) 1 Sri LR.
Leyard C.J., in Gargial et at Vs. Somasundaran Chetty (5) statesthat the "ordinary principle is that where parties are affected by anorder of which they have had no notice and which had ben madebehind their back they must apply in the first instance to the Courtwhich made an ex parte order to rescind the order on the groundthat it was improperly passed against them."
The same view was expressed by Sirimanne J in Ceylon HotelsCorporation Vs. Jayatunga (6). He stated "section 666 of the CivilProcedure Code would apply in cases where the Court grants aninterim injunction in the first instance before the other party isheard“.These opinions were considered in the case of Fernando Vs.Dias (7) by Rodrigo, J.
He states that, "The Civil Procedure Code makes provision for aremedy in situations in which the injunction had been improperlyobtained. Where an injunction has been issued illegally, if that werethe case, it is also the more reason why a court of first instancewill grant relief to an aggrieved party when it is so moved inpursuance of a remedy provided." In the case referred to above thepetitioner had not moved in the first instance to have the injunctionset aside.
These reasons are valid in considering the legality and the effect ofthe P11 order. The respondent should have moved for an interpartes hearing for the revocation or variation of that order as thepetitioners had done in the P16 order, in the trial Court itself. Arepetition of errors which give rise to irregular orders cannot beremedied by a clean sweep of all the orders. The irregularity hasto be remedied at some point of the successive erroneous decisions.
We therefore hold that the order P16 of 07.12.89 should be set asideand further direct that the trial court should inquire into the objectionsfiled by the respondent to this application in regard to the P11 orderof 12.10.89 inter partes. Objections to the order of 15.9.89 P4 havebeen filed by the petitioner on 09.10.89. The scope of the inquiryinto the P4 & P11 orders is in our opinion of the same dispute.Therefore the trial court may hold an inquiry into both matterstogether as a method of a final disposal of this matter inter partesas required by Section 213(3). The respondent will pay costs of this
Jayawardena vs. Chairman, Ceiling on Housing Property Board of
Review and others371
application in Rs. 1050/- to 1 – 7 respondents and Rs. 525/- to 8threspondent.
SENANAYAKE J. – I agree.
Order set aside.
CHAIRMAN, CEILING ON HOUSING PROPERTY BOARD OFREVIEW AND OTHERS
COURT OF APPEALK. VIKNARAJAHC.A. tO. 1523/8222 SEPTEMBER 1988.
Landlord and tenant – Ceiling on Housing Property Law, No.1 of 1973 sections 13,17, 17 A, 39 (1) – Vesting Order – Purchase by tenant – Divesting – Right of appealand review. – Writ of Certioari
Under Section 17(1) of the Ceiling on Housing Property Law the vesting in theCommissioner takes place after the Commissioner is satisfied that it is an appropriatecase for vesting after considering the equities of the case. In fact under Section 17(1) there has to be an application for the purchase of the house. For instance undersection 13, a tenant can make an application to purchase a house let to him, providedthe conditions set out in the section are satisfied. Under section 17(1) theCommissioner after holding an inquiry at which the landlord and tenant are presentand after hearing both parties, makes a determination whether he would recommendto the Minister to vest the house. This determination is notified to the parties andthe party dissatisfied with the determination can appeal to the Board of Review. Theparty dissatisfied with decision of the Board of Review can seek his remedy by writ
The Minister on being notified by the Commissioner that it is a fit case for vesting,may by order published in the Gazette vest such house in the Commissioner.Thereafter under subsection (2) the Commissioner shall enter into an agreement withthe applicant for the sale of such house subject to the conditions set out therein.
There are several provisions under which houses are vested namely Section 8(4),11(4), 14(3) and 17(1). The power to divest was given to the Commissioner by theamendment introduced by Law No. 34 of 1974.
Properties are vested under section 17 for the purpose of conveying them to thetenant and this is obligatory under the Law if the conditions mentioned in theagreement are complied with (Section 17(3) (a)). The power to dvest under section17(A) would generally be in respect of houses vested under provisions other thansection 17(1) unless there are exceptional circumstances, eg. if the tenant after
SENANAYAKE AND ANOTHER vs. PERIS