1971 (12) TMI 80 - HC - Companies Law

Winding up - Suits stayed on winding-up order, Winding up Exclusion of certain time in computing periods of limitation, Winding up Avoidance of certain attachments, executions, etc.

Issues Involved:
1. Validity of the sale of shares after the commencement of winding-up proceedings.
2. Necessity of obtaining court leave for execution and sale.
3. Jurisdiction of the High Court to entertain the application.
4. Applicability of limitation period to the application.

Detailed Analysis:

1. Validity of the Sale of Shares After the Commencement of Winding-Up Proceedings:

The official liquidator sought a declaration that the sale of 186 shares of the National Machinery Manufacturing Company Ltd. held by the company in liquidation was void under section 537 of the Companies Act. The court held that the sale of the shares was void as it occurred after the commencement of the winding-up proceedings, which began on November 1, 1966. Section 537 clearly states that any attachment or sale held without leave of the court after the commencement of winding-up shall be void. The court emphasized that the sale of the shares without the court's leave was invalid, and thus, the respondent was obligated to return the amount received from the sale.

2. Necessity of Obtaining Court Leave for Execution and Sale:

The respondent argued that no leave of the court was necessary for the execution and sale of the shares. The court rejected this argument, stating that section 537 itself implies that leave of the court is necessary for any attachment, distress, execution, or sale of the company's property after the commencement of the winding-up proceedings. The court clarified that the language of section 537 is unambiguous and mandates that any sale without the court's leave is void.

3. Jurisdiction of the High Court to Entertain the Application:

The respondent contended that the application was not maintainable and that the official liquidator should file a civil suit instead. The court held that the High Court has jurisdiction to entertain such applications under section 446(2) of the Companies Act. Section 446(2) confers special jurisdiction on the High Court to entertain or dispose of any claim made by or against the company, any question of priorities, or any other question relating to the winding-up of the company. The court emphasized that it is in the interest of all concerned that winding-up proceedings be expedited and brought to a close, and requiring the liquidator to file a suit would defeat this purpose.

4. Applicability of Limitation Period to the Application:

The respondent argued that the application was barred by limitation, citing article 137 of the Limitation Act, 1963, which prescribes a three-year limitation period for applications for which no period is provided elsewhere. The court, however, held that section 458A of the Companies Act applies, which excludes the period from the commencement of the winding-up to the date of the winding-up order and an additional one year from the computation of the limitation period. Therefore, the application was filed within the permissible period and was not barred by limitation.

Conclusion:

The court granted the summons, declaring the sale of the shares void and ordering the respondent to refund Rs. 16,740 to the official liquidator. The respondent was allowed to pay the amount in equal monthly installments over 18 months, commencing from March 1, 1972. The satisfaction of the decree obtained by the respondent in the civil suit was to be set aside upon full payment, and the respondent was given liberty to prove his debt before the liquidator. The court also awarded costs in favor of the applicant.

← Previous Next →