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Issues:
1. Whether the petitioners should be compelled to seek relief in the liquidation proceedings or be permitted to have the matter investigated in a separate suit. Analysis: The petitioners, including Lloyds Bank and two individuals, sought leave to bring a suit against a company in liquidation, Punjab Pulp and Paper Mills, Limited. The petitioners claimed to be secured creditors of the company and desired to enforce their rights against the company and other mortgagees. The opposition by the Official Liquidators and Peoples' Bank of Northern India raised concerns about the petitioners' title and conduct. The key issue was whether the petitioners should be directed to seek relief in the winding-up proceedings or be allowed to pursue a separate suit to investigate their claim as secured creditors. 2. Exercise of discretion under Section 171 of the Indian Companies Act. Analysis: Section 171 of the Indian Companies Act provides that no legal proceedings shall be commenced against a company in liquidation without the court's leave. The court has discretion to grant leave unconditionally, on terms, or refuse it. Precedents establish that a secured creditor can stand outside the winding-up proceedings and seek relief through a separate suit. The court must apply established principles to determine whether to grant leave. After considering arguments, the court decided that the petitioners should be granted leave on terms, given the circumstances of the case. 3. Conditions imposed on granting leave to bring a suit. Analysis: The court granted leave to the petitioners to bring a suit under specific conditions. The petitioners were required to deposit Government paper as security with the Official Liquidators to cover expenses incurred by the Liquidators up to the date of the suit and during the suit's pendency. If the petitioners' claim as secured creditors is successful, the amount spent by the Liquidators would be deducted. However, if their claim is disallowed, the Government paper would be returned to the petitioners. Additionally, the court mandated that the suit's outcome be reported promptly, and any decree in favor of the petitioners could not be executed against the Liquidators without the court's orders. In conclusion, the judgment addressed the petitioners' request to bring a suit against a company in liquidation as secured creditors. The court exercised its discretion under Section 171 of the Indian Companies Act, granting leave on specific terms to protect the interests of all parties involved in the liquidation proceedings.
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