1988 (9) TMI 286 - HC - Companies Law

Winding up Receiver not to be appointed of assets with liquidator, Avoidance of certain attachments, executions, etc.

Issues Involved:
1. Appointment of a receiver without leave of the company court.
2. Requirement of fresh leave for execution of the decree under section 537 of the Companies Act.
3. Validity of sale of the property without attachment.
4. Execution of the decree against the mortgaged property and guarantor.

Issue-wise Detailed Analysis:

1. Appointment of a receiver without leave of the company court:

The court found that the order dated July 22, 1987, appointing a receiver was contrary to section 453 of the Companies Act, which prohibits appointing a receiver for the assets of a company in liquidation without the leave of the company court. Since no such leave was obtained, the order appointing the receiver was set aside.

2. Requirement of fresh leave for execution of the decree under section 537 of the Companies Act:

The main controversy was whether fresh leave of the company court was required for the execution of the decree, despite leave having been obtained for prosecuting the parent suit under section 446. The court analyzed sections 446 and 537 of the Companies Act, concluding that these sections operate in different fields. Section 446 covers all suits and legal proceedings, including execution proceedings, while section 537 specifically deals with attachment, distress, or execution of a decree against the estate of the company.

The court sided with the Bombay High Court's view in Dhanraj G. Bhatia v. Janata Works P. Ltd., stating that once leave to prosecute the company in liquidation had been obtained under section 446, no further leave was required for execution. This was supported by the Supreme Court's decision in Bansidhar Shankarlal v. Mohd. Ibrahim, which held that leave obtained during the suit enures during the execution proceedings as well.

3. Validity of sale of the property without attachment:

The petitioners argued that the sale of the property without attachment was invalid. However, the court found that since the property was already under simple mortgage and hypothecated with the bank, there was no necessity for fresh attachment. The court referenced the Lahore High Court's decision in Gauri v. Ude, which stated that attachment is necessary to notify the judgment-debtor and the public, but found it inapplicable here due to the existing mortgage.

4. Execution of the decree against the mortgaged property and guarantor:

The petitioners contended that the decree should first be executed against the mortgaged property before proceeding against the guarantor. The court noted that there was no indication in the executing court's order that the decree was being executed against the guarantors. The court referenced the Supreme Court's decision in Union Bank of India v. Manku Narayana, which held that the decree-holder should proceed against the mortgaged property first and then against the guarantor. The court remarked that the executing court should keep this legal situation in view during the execution proceedings.

Conclusion:

Civil Revision No. 2905 of 1987 was partly successful, resulting in the setting aside of the order appointing the receiver. Both revision petitions regarding the order of the execution court dated August 22, 1987, were dismissed, with each party bearing their own costs.

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