1967 (7) TMI 90 - HC - Companies Law

Summary

Issues:
- Application for leave to commence a suit against a firm in liquidation filed after the institution of the suit.
- Interpretation of Section 446 of the Indian Companies Act regarding the commencement of legal proceedings against a company in liquidation.
- Whether the court can grant leave to commence a suit that is time-barred at the time of the application.

Analysis:
The judgment revolves around an application under Section 446 of the Indian Companies Act seeking leave to commence a suit against a firm in liquidation. The applicant, a prior mortgagee, filed a suit against the mortgagors and the firm in liquidation, claiming to be a subsequent mortgagee. The official liquidator objected to the suit proceeding without the court's leave due to the firm's winding-up order. The key issue was whether the court could grant leave after the suit's filing date, which was the last date of limitation.

The court analyzed Section 446, which prohibits commencing legal proceedings against a company in liquidation without the court's leave. While the literal interpretation suggested the suit should be barred for not obtaining prior leave, legal precedents allowed leave to be granted even after the suit's initiation. However, the critical question was whether the court could grant leave for a time-barred suit. The court reasoned that granting leave for a time-barred suit was not permissible due to limitations. Precedents highlighted that leave should be sought while the suit was within time to prevent granting leave for a time-barred suit.

The court emphasized that in previous cases, leave was granted when the suits were within time, ensuring no limitation issues. Notably, the court dismissed the present application as it was filed after the suit became time-barred, making it ineligible for leave. The judgment distinguished other cases cited by the applicant as irrelevant to the current scenario. Ultimately, the court concluded that the application failed, and the suit could not proceed without the requisite leave granted within the limitation period.