1991 (10) TMI 250 - HC - Companies Law

Summary

Issues:
1. Granting leave to the United Commercial Bank to continue execution proceedings.
2. Transfer of execution file to the High Court.
3. Validity of the ex parte decree declared void by the liquidator.
4. Bank's status as a secured creditor.
5. Interpretation of provisions under sections 446(1) and 537 of the Companies Act.

Analysis:
1. The appeal was filed by Hindustan Forest Company (P) Ltd. against an order granting leave to the United Commercial Bank to continue execution proceedings. The bank had obtained a decree in 1974, and the execution application was filed in the Court of the Sub-Judge I Class, Pathankot. The company argued that the decree was void and time-barred. The court held that necessary relief was to be allowed under sections 446(1) and 537 of the Companies Act, and the leave of the court was required to proceed with execution.

2. The company sought transfer of the execution application from Pathankot to the High Court due to the company being in liquidation. The court referenced the provisions of section 446 of the Companies Act, stating that either the execution should be transferred to the High Court or leave of the court was necessary. The court relied on previous judgments to support the transfer of execution to the High Court in such circumstances.

3. The liquidator had declared the ex parte decree to be void, leading to an argument that the execution could not proceed. However, a previous decision between the parties had established that an ex parte decree could not be declared void by the liquidator. The court held that the bank remained a secured creditor based on the decree obtained, allowing the execution to proceed.

4. The appellant argued that by attaching the property of the judgment-debtor, the bank had ceased to be a secured creditor. The court distinguished previous cases where attachment orders were passed before decrees were obtained. In this case, the bank was considered a secured creditor due to the nature of the decree obtained, allowing the bank to recover the decretal amount through the sale of mortgaged and hypothecated properties.

5. The court discussed the position of a secured creditor as outlined by the Supreme Court in a previous case. It was clarified that a secured creditor could choose to recover the amount by selling mortgaged or hypothecated properties and remain outside winding-up proceedings. However, if the creditor opted to recover through court assistance and attachment of other properties, they would cease to be a secured creditor and rank with other creditors.

In conclusion, the court dismissed the appeal, upholding the decision to allow the execution to proceed and directing the parties to appear in the executing court as per the given date.