1982 (9) TMI 209 - HC - Companies Law

Winding up Appointment and composition of committee of inspection Avoidance of certain attachments executions etc.

Issues Involved:
1. Execution of the eviction decree without leave of the court under section 537 of the Companies Act, 1956.
2. Creditor's locus standi in matters regarding the administration of the assets of a company in liquidation.
3. Necessity of obtaining leave under section 537 for execution of a decree after obtaining leave under section 446.
4. Validity of possession obtained by landlords in execution of the decree.

Issue-Wise Detailed Analysis:

1. Execution of the Eviction Decree Without Leave of the Court Under Section 537 of the Companies Act, 1956:
The primary issue was whether the landlord, M/s. Janata Industries, could execute the eviction decree without obtaining leave of the court as required by section 537 of the Companies Act, 1956. The court noted that section 537(1) states that any attachment, distress, or execution put in force without leave of the court against the estate or effects of the company after the commencement of the winding-up shall be void. However, it was determined that once leave to prosecute the suit is obtained under section 446, no further leave is necessary to execute the decree obtained in such a suit. The court referred to the Supreme Court decision in Bansidhar Shankarlal v. Mohd. Ibrahim, which clarified that if leave to prosecute the suit is obtained, no further leave is required for executing the decree.

2. Creditor's Locus Standi in Matters Regarding the Administration of the Assets of a Company in Liquidation:
The court addressed the issue of whether a creditor has the right to be heard in matters concerning the administration of the assets of a company in liquidation. It was held that a creditor has no such right when the company is a going concern, and this position does not change during the winding-up process. The court emphasized that while the practice of notifying the petitioning creditor in some matters is saved by rule 6 of the Companies (Court) Rules, 1959, this does not extend to granting a creditor the right of audience in such matters. Consequently, the court refused to grant leave to the creditor to take out the judge's summons.

3. Necessity of Obtaining Leave Under Section 537 for Execution of a Decree After Obtaining Leave Under Section 446:
The court examined whether further leave under section 537 is required after obtaining leave under section 446 for prosecuting a suit. It was concluded that section 537 applies only when execution is sought to be levied after the winding-up order of a decree obtained before the winding-up order. The court clarified that once leave to prosecute the suit is obtained under section 446, no further leave is necessary for executing the decree. The court distinguished this case from the decision of the Delhi High Court in Tanwar Finance P. Ltd., In re, which required further leave for attachment and sale of property, noting that the facts of the present case were different.

4. Validity of Possession Obtained by Landlords in Execution of the Decree:
The court considered whether the possession obtained by the landlords in execution of the decree could be disturbed. It was held that since the landlords had obtained possession through due process of law and section 537 did not apply to the facts of the case, the possession could not be disturbed. The court noted that even if possession were to be restored to the official liquidator, the landlords would simply be required to obtain leave to execute the decree again, which the court would have no reason to refuse. Therefore, the possession obtained by the landlords was deemed valid.

Conclusion:
The court directed the official liquidator to accept Rs. 60,000 from the landlords, M/s. Janata Industries, and to not take any further action in the matter. The landlords agreed to give up all arrears of compensation and not to hold the official liquidator liable in any manner. The directions on the report were granted with the amount being Rs. 60,000, and the landlords' undertaking as stated.

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