1991 (1) TMI 364 - HC - Companies Law

Issues Involved:
1. Jurisdiction of the company court under Section 446(2) of the Companies Act.
2. Applicability of Section 446(2) to suits involving additional defendants besides the company under liquidation.
3. Interpretation and scope of Section 446(2)(a) of the Companies Act.
4. Leave to file suits in courts other than the company court.

Detailed Analysis:

1. Jurisdiction of the Company Court under Section 446(2) of the Companies Act:
The principal question revolves around the construction of Section 446(2)(a) of the Companies Act. The appellant argued that under Section 446(2) read with clause (a), the company court has jurisdiction to entertain and dispose of a suit or proceeding only if it is by or against the company alone. The court, however, clarified that Section 446(2) was introduced to facilitate the disposal of winding-up proceedings and to prevent wasteful litigation. The court emphasized that the company court has jurisdiction to entertain and dispose of suits involving the company under liquidation to protect and realize its assets efficiently.

2. Applicability of Section 446(2) to Suits Involving Additional Defendants Besides the Company under Liquidation:
The appellant contended that the company court cannot entertain suits where there are other defendants in addition to the company under liquidation. The court rejected this contention, stating that Section 446(2) does not preclude the company court from entertaining such suits. The court noted that if the company under liquidation is the principal debtor, the company court can entertain and dispose of the suit even if there are additional defendants, such as guarantors. The court highlighted that the company court has full powers to pass decrees against all defendants, including guarantors, and enforce them under Section 634 of the Companies Act.

3. Interpretation and Scope of Section 446(2)(a) of the Companies Act:
The court examined the historical evolution and the purpose of Section 446(2). It referred to the Supreme Court's judgment in Sudarsan Chits (India) Ltd. v. G. Sukumaran Pillai, which outlined that Section 446(2) was designed to enlarge the jurisdiction of the company court to expedite the winding-up process and avoid prolix litigation. The court emphasized that Section 446(2) must be construed to advance its object, enabling the company court to handle all incidental proceedings related to the winding-up, including suits involving claims against the company and other defendants.

4. Leave to File Suits in Courts Other than the Company Court:
The appellant sought leave to file a suit in the High Court of Bombay on its original side, arguing that the Bombay court alone had jurisdiction to decide the claim against the guarantor. The court noted that leave of the company court is necessary to file or continue suits against the company under liquidation, even if there are additional defendants. The court referred to judgments from the Mysore and Madras High Courts, which supported granting leave to file suits involving other defendants, provided the decree is not enforced against the company without the company court's leave. The court concluded that the company court has the discretion to entertain and dispose of such suits, ensuring efficient administration of the company's assets.

Conclusion:
The appeal was dismissed, affirming the company court's jurisdiction to entertain and dispose of suits involving the company under liquidation and additional defendants. The court held that Section 446(2) of the Companies Act allows the company court to handle such suits to facilitate the winding-up process and avoid unnecessary litigation. The appellant's contention that the suit should be filed in the High Court of Bombay was rejected, and no order as to costs was made.

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