2005 (6) TMI 287 - HC - Companies Law

Summary

Issues Involved:
1. Inspection of papers, records, and proceedings.
2. Necessity of obtaining leave under Section 446 of the Companies Act.
3. Jurisdiction of High Court under Letters Patent vis-`a-vis Section 446.
4. Applicability of Section 446(4) to original jurisdiction proceedings.
5. Locus standi to raise the issue of leave under Section 446.

Detailed Analysis:

1. Inspection of Papers, Records, and Proceedings:
The plaintiff sought an order against defendant No. 4 (the official liquidator) to provide inspection and certified copies of all papers, records, and proceedings in the suit. The court noted that the plaintiff, being in possession of all records and proceedings as the party in carriage of the suit, did not substantiate the need for certified copies from the liquidator. The court found this request baseless and dismissed the chamber summons.

2. Necessity of Obtaining Leave under Section 446 of the Companies Act:
The court examined whether the plaintiff needed to obtain leave under Section 446 after the company went into liquidation. Section 446(1) states that no suit or legal proceeding shall continue against the company without leave from the court that ordered the winding up. The plaintiff argued that the previous order allowing the liquidator to be impleaded implied that leave was not necessary. However, the court clarified that the previous order did not address the necessity of leave under Section 446. The court emphasized that once a winding-up order is passed, all proceedings are stayed unless leave is obtained to ensure equal distribution of the company's assets among claimants.

3. Jurisdiction of High Court under Letters Patent vis-`a-vis Section 446:
The plaintiff contended that the High Court's jurisdiction under the Letters Patent was not affected by Section 446 of the Companies Act. The court rejected this argument, stating that the Letters Patent jurisdiction is subject to laws enacted subsequently, including the Companies Act. The court held that the provisions of Section 446 apply regardless of the High Court's establishment under the Letters Patent.

4. Applicability of Section 446(4) to Original Jurisdiction Proceedings:
The plaintiff argued that Section 446(4), which exempts appellate proceedings from the stay provisions, should also apply to original jurisdiction proceedings. The court disagreed, explaining that Section 446(4) specifically pertains to appellate proceedings, recognizing the hierarchy of judicial authority. The court noted that original jurisdiction proceedings are not exempt from the stay provisions under Section 446.

5. Locus Standi to Raise the Issue of Leave under Section 446:
The plaintiff asserted that only the official liquidator had the locus standi to raise the issue of leave under Section 446. The court dismissed this claim, stating that the statutory stay under Section 446 applies irrespective of whether the liquidator raises the issue. Courts are mandated to act in accordance with statutory provisions, and the stay must be recognized even if not contested by the liquidator.

Conclusion:
The court dismissed the chamber summons, stating that the plaintiff must obtain leave under Section 446 from the High Court of Gujarat, which passed the winding-up order, to proceed with the suit. The suit remains stayed until such leave is obtained. The court also imposed costs of Rs. 10,000 on the plaintiff for the chamber summons.