1981 (4) TMI 238 - HC - Companies Law

Winding up Suits stayed on winding-up order Winding up - Avoidance of certain attachments executions etc.

Summary

Issues Involved:
1. Requirement of leave under Section 446 of the Companies Act, 1956, for initiating proceedings under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971.
2. Nature of proceedings under the 1971 Act and their classification as "legal proceedings."
3. Interaction between the Companies Act and the Public Premises Act in the context of winding-up proceedings.
4. Jurisdiction and authority of the Estate Officer under the 1971 Act in cases involving companies under winding-up.
5. Applicability of Section 446 to proceedings before authorities other than ordinary courts.

Detailed Analysis:

Requirement of Leave under Section 446 of the Companies Act, 1956:

The primary issue referred to the Full Bench was whether the Life Insurance Corporation (LIC) is required to seek leave of the winding-up court under Section 446 of the Companies Act, 1956, before initiating proceedings under Sections 4 and 7 of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. The court noted that Section 446(1) stipulates that no suit or other legal proceeding shall be commenced against a company in winding-up without the leave of the court. The court emphasized that the object of Section 446 is to save the company from unnecessary litigation and to protect its assets for equitable distribution among creditors and shareholders.

Nature of Proceedings under the 1971 Act:

The court examined the nature of proceedings under the Public Premises Act, 1971, which provides a speedy mechanism for eviction of unauthorized occupants from public premises and for recovery of rent or damages. The court noted that the 1971 Act was enacted to remove the discrimination and arbitrariness found in the earlier 1958 Act, as identified by the Supreme Court in Northern India Caterers (Pvt.) Ltd. v. State of Punjab. The court concluded that the 1971 Act does not create new rights and liabilities but provides a new forum and remedy for public premises.

Interaction between the Companies Act and the Public Premises Act:

The court discussed the interaction between the Companies Act and the Public Premises Act, particularly in the context of winding-up proceedings. It was argued that the 1971 Act is a special legislation dealing with public premises, while the Companies Act is a general legislation dealing with companies in general. The court held that when a company is under winding-up, the Companies Act, being a special statute in this context, prevails over the general provisions of the Public Premises Act. The court emphasized that the winding-up court must have control over the assets of the company to ensure equitable distribution among creditors.

Jurisdiction and Authority of the Estate Officer:

The court examined whether the Estate Officer under the 1971 Act has exclusive jurisdiction to deal with public premises involving companies under winding-up. It was argued that Section 15 of the 1971 Act bars civil courts from entertaining suits regarding eviction or recovery of rent or damages for public premises. However, the court held that this does not apply when the company in question is under winding-up, as the Companies Act takes precedence. The court concluded that proceedings before the Estate Officer are legal proceedings within the meaning of Section 446(1) of the Companies Act, requiring leave of the winding-up court.

Applicability of Section 446 to Proceedings Before Other Authorities:

The court addressed the applicability of Section 446 to proceedings before authorities other than ordinary courts. It referred to various precedents, including Governor-General in Council v. Shiromani Sugar Mills Ltd. and Union of India v. India Fisheries (P.) Ltd., which held that legal proceedings under Section 446 include those initiated by authorities other than ordinary courts, provided they pertain to the rights and liabilities under general law. The court distinguished between proceedings under special statutes like the Income Tax Act, which create their own rights and liabilities, and proceedings under the Public Premises Act, which deal with rights and liabilities under general law.

Conclusion:

The court concluded that leave must be obtained from the winding-up court by the LIC before initiating or continuing proceedings before the Estate Officer under the Public Premises Act, 1971. The court clarified that it was not addressing the merits of whether leave should be granted, as that decision rests with the single judge handling the application filed by the LIC under Section 446 of the Companies Act. The matter was directed to be listed before the learned single judge for appropriate proceedings. The court expressed its thanks to the counsel for the parties and the amicus curiae for their assistance.