1971 (11) TMI 110 - HC - Companies Law

Summary

Issues:
Transfer of winding-up proceedings to the Court of the Additional District Judge under section 435 of the Companies Act, 1956. Application under section 446 of the Companies Act for permission to proceed with Suit No. 100/55 in the Court of the Civil Judge, Agra. Appeal against the order of the learned Additional District Judge directing the transfer of the suit to his court.

Analysis:
The appellant filed Suit No. 100/55 against the respondent-company for the recovery of the unpaid sale price of a factory. A petition for winding-up of the company was filed, leading to the transfer of winding-up proceedings to the Court of the Additional District Judge. The appellant sought permission under section 446 of the Companies Act to continue the suit in Agra, which was opposed by the official liquidator. The learned Additional District Judge ordered the transfer of the suit to his court, prompting the appellant's appeal.

The appellant's counsel argued that permission for the suit's continuation should be granted unless exceptional circumstances exist, citing past decisions under the Companies Act, 1913. However, section 446 of the Companies Act, 1956, requires court permission for legal proceedings against a company in liquidation. Sub-section (3) of section 446 allows the transfer of suits pending in other courts to the winding-up court, a provision absent in the previous Act.

The court clarified that the discretion to transfer cases under sub-section (3) must be exercised judiciously and in the interest of all parties. While the appellant claimed the suit was ready for disposal due to a compromise, the official liquidator repudiated the compromise, necessitating the suit to proceed to trial. The court emphasized the importance of trying the suit in the winding-up court to safeguard the interests of creditors and shareholders.

The appellant contended that being a secured creditor, the suit should not be transferred. However, the court deferred judgment on this issue to the Additional District Judge. The learned Additional District Judge's decision to transfer the suit was deemed judicious, and the appeal was dismissed without costs.

In conclusion, the court upheld the transfer of the suit to the winding-up court, emphasizing the need to protect the interests of all parties involved in the liquidation process. The appellate court found no reason to interfere with the learned district judge's discretionary decision.