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2023 (2) TMI 330 - HC - Companies LawAuction purchase - Seeking direction that the Official Liquidator to remove encroachment from the leasehold land of the company - permission / to take leave of this Court under section 446 of the Companies Act 1956 not done - in absence of due permission taken from this Court under the provisions of section 446 of the Companies Act 1956 the decree passed by the Small Cause Court in Rent Suit No. 211 of 1991 is required to be set aside - respondent submitted that the present application has been rejected on the ground of delay and latches. HELD THAT - In view of this Court it was incumbent for the respondents herein to take permission / to take leave of this Court under section 446 of the Companies Act 1956 before proceeding with i.e the Rent Suit no. 372 of 1988 and Civil Misc. Application No. 26 of 2008 for restoration of the Rent Suit No. 211 of 1991. The respondents herein have accepted the fact that no permission has been sought for from this Court inspite of the order passed by this Court dated 06.08.2009 wherein it was categorically stated that if the respondents were to continue with the above referred proceedings then leave of this Court i.e the Company Court was required. That the Official Liquidator was to be joined as party in the aforesaid proceedings. And only thereafter the orders passed in the aforesaid proceedings can be enforced by the respective respondents. It is pertinent to refer the ratio laid down by the Apex Court in the case of HARIHAR NATH VERSUS STATE BANK OF INDIA 2006 (4) TMI 253 - SUPREME COURT where the Supreme Court held that the leave under section 446 of the 1956 Act is required to be taken. Such leave can be obtained even after initiation of the proceedings. In absence of leave the proceedings cannot be recorded as to have been instituted on the date till leave is obtained. The proceedings can be validated only after the leave from the court is obtained. The award passed in Rent Suit No. 372 of 1988 dated 15.01.2015 and also the Judgment passed in Civil Misc. Application No.26 of 2008 on 31.03.2017 below Ex.5 and on 04.12.1999 passed in Rent Suit No.211 of 1991 cannot be executed till the provisions of Section 446 of the Companies Act 1966 are complied with - Application allowed.
Issues Involved:
1. Validity of the sale of the company's assets. 2. Requirement of obtaining leave under Section 446 of the Companies Act, 1956. 3. Legal standing of the judgments passed by the Small Cause Court, Vadodara. 4. Delay and laches in filing the application. Detailed Analysis: 1. Validity of the Sale of the Company's Assets: The company, Shree Ambica Mills Ltd, was ordered to be wound up on 17.01.1997. The Official Liquidator took charge of the assets and properties, including property situated at Akota Road, Vadodara. The applicant submitted an offer for the purchase of the company's assets for Rs. 5.15 crores, which was subsequently confirmed by the Court at Rs. 8.60 crores. The sale was confirmed on the condition that the dues of the Gujarat Electricity Board (GEB) and the Municipal Corporation would be borne by the purchaser. The Official Liquidator executed the sale deed for the freehold land in favor of Mr. Manubhai Maganbhai Patel and the leasehold land in favor of the applicant. 2. Requirement of Obtaining Leave under Section 446 of the Companies Act, 1956: The core issue revolves around the necessity of obtaining leave under Section 446 of the Companies Act, 1956, before proceeding with any legal action against the company under liquidation. The Court emphasized that it was incumbent for the respondents to seek permission from the Company Court before proceeding with the Rent Suit No. 372 of 1988 and Civil Misc. Application No. 26 of 2008. The failure to obtain such leave rendered the proceedings voidable at the instance of the Official Liquidator. The Court referred to the Supreme Court's ruling in Harihar Nath & Ors. Vs. State Bank of India and Erach Boman Khavar vs Tukaram Sridhar Bhat & Ors, which clarified that leave under Section 446 is mandatory and can be obtained even after the initiation of proceedings. 3. Legal Standing of the Judgments Passed by the Small Cause Court, Vadodara: The judgments passed by the Small Cause Court, Vadodara, in Rent Suit No. 372 of 1988 and Rent Suit No. 211 of 1991 were challenged on the grounds that they were issued without the necessary leave under Section 446 of the Companies Act, 1956. The Court found that the Small Cause Court erroneously proceeded without considering the affidavit filed by the Official Liquidator and the requirement of obtaining leave. Consequently, the awards and judgments passed by the Small Cause Court were deemed non-executable until compliance with Section 446 was achieved. 4. Delay and Laches in Filing the Application: The respondent argued that the application should be dismissed due to delay and laches, as it was filed more than two years after the sale deed was executed. The Court acknowledged the delay but emphasized the legal necessity of obtaining leave under Section 446, which superseded the issue of delay. The Court held that the proceedings could not be validated until the leave was obtained, thereby allowing the application to the extent of enforcing compliance with Section 446. Conclusion: The Court concluded that the judgments and decrees passed by the Small Cause Court, Vadodara, in Rent Suit No. 372 of 1988 and Civil Misc. Application No. 26 of 2008 were not executable until leave under Section 446 of the Companies Act, 1956, was obtained. The application was allowed to this extent, and the rule was made absolute.
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