1970 (8) TMI 46 - HC - Companies Law

Issues Involved:
1. Whether leave can be granted under section 446 of the Companies Act, 1956, to continue a suit instituted after the date of the winding up order.
2. Interpretation of section 446 of the Companies Act, 1956, in comparison with section 171 of the Indian Companies Act, 1913, and the provisions of the Presidency Towns Insolvency Act, 1909, and the Provincial Insolvency Act, 1920.
3. Whether a suit is commenced upon the presentation of a plaint or issuance of a writ of summons.
4. Whether the suit instituted by the plaintiffs is against the company or for its benefit, and whether leave under section 446 is necessary.

Detailed Analysis:

1. Whether leave can be granted under section 446 of the Companies Act, 1956, to continue a suit instituted after the date of the winding up order:
The court examined the provisions of section 446(1) of the Companies Act, 1956, which states: "When a winding up order has been made or the official liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the court and subject to such terms as the court may impose." The court interpreted this to mean that leave to continue or proceed with a suit can only be granted if it is pending at the date of the winding up order, not if it is commenced after the winding up order. The court concluded that leave to continue Suit No. 252 of 1969, which was instituted after the date of the winding up order, cannot be granted.

2. Interpretation of section 446 of the Companies Act, 1956, in comparison with section 171 of the Indian Companies Act, 1913, and the provisions of the Presidency Towns Insolvency Act, 1909, and the Provincial Insolvency Act, 1920:
The court noted that section 171 of the Indian Companies Act, 1913, and section 231 of the English Companies Act, 1948, allowed for leave to be obtained either before or after the commencement of a suit. However, section 446 of the Companies Act, 1956, separates suits commenced before the winding up order from those commenced after. The court referred to previous judgments, including those by the Lahore High Court and the Calcutta High Court, which interpreted section 171 to allow for leave to be obtained after the commencement of a suit. However, the court emphasized that section 446 makes a clear distinction, requiring leave to be obtained before the commencement of a suit if it is instituted after the winding up order.

3. Whether a suit is commenced upon the presentation of a plaint or issuance of a writ of summons:
The court rejected the argument that a suit is not commenced until the issuance of the writ of summons or the stage of trial. The court clarified that under Indian law, specifically section 26 of the Code of Civil Procedure and Order 4, rule 1, a suit is instituted by the presentation of a plaint. This is different from the English practice, where a suit is instituted when a writ of summons is issued.

4. Whether the suit instituted by the plaintiffs is against the company or for its benefit, and whether leave under section 446 is necessary:
The plaintiffs argued that the suit was for the benefit of the company and that no leave under section 446 was necessary. The court did not address this argument in detail, noting that the application before it was for leave to continue the suit on the basis that it was against the company. The court stated that the plaintiffs could raise this contention during the hearing of the suit. Similarly, the court noted that the defendants' argument that the entire suit would be without jurisdiction if leave was refused against defendant No. 2 could be raised at the hearing of the suit.

Conclusion:
The judge's summons was dismissed, with the court holding that leave to continue Suit No. 252 of 1969, instituted after the winding up order, could not be granted under section 446 of the Companies Act, 1956. Costs were to be costs in the suit, and counsel was certified.

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