1998 (6) TMI 524 - HC - Companies Law

Summary

Issues Involved:
1. Necessity of permission under section 446(1) of the Companies Act for instituting or continuing proceedings against a company under liquidation.
2. Applicability of the Kerala Revenue Recovery Act beyond the territorial limits of Kerala.
3. Limitation period for enforcing a decree through revenue recovery proceedings.
4. Authority of the official liquidator to initiate revenue recovery proceedings.

Issue-wise Detailed Analysis:

1. Necessity of Permission under Section 446(1):
The official liquidator argued that the respondent's suit in the Munsiff's Court, Belgaum, seeking a permanent prohibitory injunction against revenue recovery proceedings, required the court's permission under section 446(1) of the Companies Act. The respondent contended that such permission was unnecessary as the suit was a defensive measure to escape liability from proceedings initiated by the company. The court examined precedents, including Jiwan Dass v. Peoples Bank of Northern India and Rahmat Ali Fatehullah v. Calcutta National Bank Ltd., concluding that defensive actions in response to proceedings initiated by the company do not require permission. However, instituting independent proceedings to restrain the company from executing a decree does require permission. The court held that the respondent's suit was not merely defensive but an independent proceeding, thus necessitating permission under section 446(1).

2. Applicability of the Kerala Revenue Recovery Act Beyond Kerala:
The respondent argued that the Kerala Revenue Recovery Act was inapplicable outside Kerala. However, the court noted that by Notification No. G.O. Ms. No. 418/94/RD, dated August 2, 1994, the Kerala Government extended the Act's applicability to amounts due to the official liquidator. The court further explained that state governments engage in revenue recovery on a reciprocal basis, allowing the official liquidator to enforce recovery in Karnataka through the District Collector. Thus, the court found the respondent's contention unsustainable.

3. Limitation Period for Enforcing a Decree:
The respondent claimed the decree was barred by limitation and unenforceable. The court referenced the Full Bench decision in Kerala Fisheries Corporation v. P.S. John, which held that the Limitation Act applies only to court proceedings, not to proceedings before the Collector under the Revenue Recovery Act. Since the Collector's actions under the Revenue Recovery Act do not involve adjudication, the limitation period does not apply. Consequently, the court rejected the respondent's argument on this ground.

4. Authority of the Official Liquidator to Initiate Revenue Recovery Proceedings:
The respondent challenged the official liquidator's authority to initiate revenue recovery proceedings. The court affirmed the liquidator's authority, citing the Kerala Government's notification extending the Revenue Recovery Act to amounts due to the liquidator. Additionally, the court emphasized the reciprocal enforcement of revenue recovery between states, validating the liquidator's actions in Karnataka.

Conclusion:
The court concluded that all the respondent's objections were unsustainable. It affirmed the official liquidator's entitlement to stay the proceedings in O.S. No. 802 of 1997 under section 446(1) of the Companies Act. The application was allowed, and the interim stay order was made absolute.