1929 (8) TMI 7 - HC - Companies Law

Summary

Issues: Application for leave to proceed with a suit and for possession of mortgaged properties by secured creditors in a company in liquidation.

The judgment addresses an application made by secured creditors of a company in liquidation, seeking leave to proceed with a suit filed in the Subordinate Judge's Court and requesting the Official Liquidator to transfer possession of mortgaged properties to a receiver appointed in the suit. The winding-up order had been issued, invoking section 171, which necessitates court permission to continue any legal proceedings against the company. The petitioners, being secured creditors, faced no objection to proceeding with the suit, as it would facilitate determining the amount owed to them under the mortgage. Notably, the mortgage predated the company's acquisition of the property, indicating the company assumed the property subject to the existing mortgage.

The judgment delves into the appointment of a receiver and the possession of assets. Despite the Official Liquidator being in possession of the property following the winding-up order, a receiver was appointed, raising questions under section 175(6) of the Indian Companies Act. The judge opined that the term "assets" encompassed properties subject to charges, emphasizing that such assets should be considered part of the company's assets. Referring to a previous case, the judge highlighted the need to prevent conflicts between a receiver and an Official Liquidator, suggesting that a receiver appointed by a secured creditor should not be given preference over the Official Liquidator.

A prior order by another judge in a related case was mentioned, where it was held that the sub-section in question prevented the appointment of a receiver to displace the liquidator at the behest of a secured creditor. The judge, however, leaned towards the principle established in a case law, indicating that the court typically favors the Official Liquidator over a receiver in cases of competition between the two. Consequently, the judge granted permission to proceed with the suit but denied the request for possession by the receiver.

Regarding costs, the judge noted that the opposition from the liquidator was not solely due to the application for leave to proceed with the suit. Therefore, the applicant was directed to bear the liquidator's costs, despite being granted permission to continue with the suit.