1984 (8) TMI 242 - SC - Companies Law

Whether the winding up proceedings were pending or had come to an end when the Appellate Bench froze the winding up order by keeping it in abeyance? Held that - Appeal allowed. The High Court was in error in rejecting the application made on behalf of the appellant-company for directing the provisional liquidator to prefer claims petition on the materials and expenses to be furnished by the company. The amounts realised by the provisional liquidator on filing claim petitions shall be handed over to the company and the appellant-company is under an obligation to use, spend, and appropriate them in the implementation of the scheme under the supervision of the court.

Issues Involved
1. Jurisdiction of the court under Section 446(2)(b) of the Companies Act, 1956.
2. Status of the winding-up order and its effect on the implementation of the scheme of compromise and arrangement.
3. Authority of the provisional liquidator to file claim petitions.

Detailed Analysis

1. Jurisdiction of the Court under Section 446(2)(b) of the Companies Act, 1956
The primary legal question was the scope and ambit of the jurisdiction conferred on the court winding up a company by Section 446(2)(b). Section 446(2) states that the court which is winding up the company shall have jurisdiction to entertain or dispose of any suit or proceeding by or against the company, any claim made by or against the company, any application made under Section 391 by or in respect of the company, and any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in the course of the winding up of the company.

The court emphasized the historical evolution of Section 446(2), noting that it was introduced to enlarge the jurisdiction of the court winding up the company to facilitate the disposal of winding-up proceedings. The provision was designed to avoid the need for the official liquidator to file separate suits to realize claims, which would prolong and complicate the winding-up process. The court concluded that the jurisdiction conferred by Section 446(2) must be construed to advance the object of expediting winding-up proceedings.

2. Status of the Winding-Up Order and its Effect on the Implementation of the Scheme of Compromise and Arrangement
The winding-up order made by the learned company judge was held in abeyance by the Division Bench of the Kerala High Court, which approved a scheme of compromise and arrangement under Section 391 of the Companies Act. The court noted that the winding-up order was neither quashed, set aside, canceled, revoked, nor recalled. It was merely held in abeyance, meaning it was in a state of suspended animation but could be revived upon default in implementing the scheme.

The court clarified that the winding-up proceedings were still pending because the winding-up order continued to exist, albeit inoperative for the time being. Therefore, the court which made the winding-up order or the court which kept it in abeyance retained jurisdiction to give necessary directions to the provisional liquidator under Section 446(2).

3. Authority of the Provisional Liquidator to File Claim Petitions
The court addressed the contention that the company court would have no jurisdiction to entertain claim petitions under Section 446(2) because there was no winding-up proceeding pending. The court rejected this contention, stating that the provisional liquidator could file claim petitions to recover debts and claims due in favor of the company, which would assist in implementing the scheme of compromise and arrangement.

The court held that the Appellate Bench, which was supervising the implementation of the scheme, was justified in seeking directions for the provisional liquidator to file claim petitions. The amounts realized by the provisional liquidator would be handed over to the company for use in implementing the scheme under court supervision.

Conclusion
The Supreme Court allowed the appeal, setting aside the High Court's order and granting the application for directions to the provisional liquidator to file claim petitions. The court emphasized that the winding-up order, although held in abeyance, continued to subsist, and the court retained jurisdiction under Section 446(2) to facilitate the implementation of the scheme of compromise and arrangement. The appellant was directed to bear its own costs.

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