An order passed by a Company Judge under Sec. 235 of the Indian Companies Act, 1913, dropping the proceeding against two Directors at the preliminary stage, is not appealable under Sec. 202 of the Act, as it does not affect the rights or liabilities of the parties.

1. This is an appeal under Sec.202 of the Indian Companies Act, 1913 , against the order of the Company Judge (Sahai, J.), dated the 13th September 1963, in a proceeding under Sec.235 of that Act. That proceeding was initiated on an application by the Official Liquidator for action under that section against 23 persons including several Directors of the Company under liquidation, viz., the Gaya Sugar Mills, Ltd. He alleged that, while in charge of the assets of the Company, they committed various acts of misfeasance, malfeasance, non-feasance, breach of trust, etc., and, that, consequently action should be taken against them under, Sec.235.

2. It is, however, conceded by counsel for both sides that, against some of the persons named by the Official Liquidator, the Company Judge did not take further action, he continued the proceeding under Sec.235 only against some of the Directors; but, at the preliminary stage of the proceeding, Counsel for the Liquidator and for Lakshmipat Singhania and Bridhi Chand Bhalotia (the two respondents here) requested him to take up first the question whether, at that stage, the proceeding should go on against Lakshmipat Singhania and Bridhi Chand Bhalotia (two of the Directors named in paragraph 9). It was also conceded by counsel for both sides that such a proceeding should go on only if there was a prima facie case against them. The learned Company Judge then addressed himself to this limited question, and, after a full discussion, passed the following order:

"In the result, I do not think that a prima facie case for action under Sec.235 has been made out against either of the two Directors in question. Hence, I direct that these two persons be released from the enquiry at this stage."

It is conceded by counsel for both sides have that, after releasing these two Directors, the Company Judge is proceeding with the enquiry against some Directors mentioned in the original application of the Official Liquidatoi.

3. Mr. Lalnarayan Sinha for the respondents raised a preliminary objection to the maintainability of this appeal. According to him. notwithstanding the wide language used in Sec.202 of the Indian Companies Act, 1913 , their Lordships of the Supreme Court in Shankarlal Aggarwala V/s. Shankarlal Poddar, AIR 1965 SC 507 at p. 534 have held that the "order or decision", referred to in that section, would exclude "merely procedural orders or decision which do not affect the rights or liabilities of the parties." According to him, therefore, where only a tentative decision Is taken to drop the proceeding against two of the Directors at that stage, no order finally affecting the rights and liabilities of the parties has been passed by the Company Judge, and that consequently no appeal lay.

4. I am inclined to accept this contention. There can be no doubt, in view of the aforesaid judgment of the Supreme Court, that it is not every order or decision of a Company Judge that is appealable under Sec.202. Those orders which do not affect the rights and liabilities of the parties will not be appealable. If a Company Judge, at the preliminary stage of the hearing of an application under Sec.235 against several persons, considers that, at that stage, there was not a prima facie case against two of the persons, and hence decides to drop the proceeding against them, the order cannot be said to affect the rights or liabilities of the parties. The proceeding is still continuing against others, and, if, in the course of that proceeding, some other facts come to light, which have a bearing on the conduct of Lakshmipat Singhania and Bridhi Chand Bhalotia, the Company Judge will undoubtedly have jurisdiction to reconsider his order. Hence, his order under appeal cannot be said to have been attained that finality to make it appealable.

5. The language of Sec.235(1) of the Indian Companies Act, 1913 , may now be carefully examined. That sub-section says (omitting the immaterial portions):

"Where, in the cou