1989 (2) TMI 351 - HC - Companies Law

Summary

Issues:
- Jurisdiction of the court in a suit for recovery of outstanding amounts against a partnership firm and a private limited company.
- Effect of winding up order on the proceedings against the defendants.
- Interpretation of Section 446 of the Companies Act, 1956 regarding the continuation of legal proceedings after a winding up order.

Jurisdiction of the Court:
The State Bank of India filed a suit against a partnership firm and a private limited company for the recovery of outstanding amounts. The plaintiff sought a decree against all defendants, but later clarified that the private limited company was only liable for one specific credit facility. The court appointed a receiver to take possession of the goods of the partnership firm. The defendants did not contest the sale of goods, except for the private limited company's argument that the court lacked jurisdiction due to its winding up order.

Effect of Winding Up Order:
The private limited company, defendant No. 4, was ordered to be wound up. The defendants argued that the suit could not proceed against any defendant due to the winding up order. Section 446(1) of the Companies Act, 1956 was cited, which states that legal proceedings against a company must have the court's leave after a winding up order. The question arose whether the suit could proceed against other defendants when one defendant was under winding up.

Interpretation of Section 446 of the Companies Act:
The court analyzed the language of Section 446(1) and determined that the provision applies only to the company under winding up and not to other defendants. The court emphasized that the liability of other defendants may be separate from that of the company. The court concluded that the suit could proceed against the partnership firm and its partners without the need for leave from the company court. The court relied on legal principles and previous judgments to support its interpretation.

Conclusion:
The court accepted the receiver's report and directed the sale of machinery/goods belonging to the partnership firm. The court outlined the sale process, including advertising, inspection by prospective buyers, and confirmation of offers by the court. The plaintiff was instructed to bear the expenses of the sale, and the receiver's fee was fixed at Rs. 5,000. The court allowed the application in favor of the plaintiff, with each party bearing its own costs.