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TMI Blog1966 (3) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... in any respect false. That being so, I think I ought to grant the stay if I have the power to do so. For, from the circumstances disclosed I am satisfied that, if the respondent is to bring the properties of the company to sale at this stage for the recovery of the dues instead of waiting for payment in the winding-up, that would gravely prejudice the winding-up. It is true that the respondent claims to be a preferential creditor. (Strictly speaking, according to the respondent's case, the Central Government is really the creditor, the respondent being only a collecting agent). It is not admitted that it is but I shall proceed on the assumption that it is, for, I do not propose to decide that question here. There is on that assumption no question of a pari passu distribution as between the respondent and the ordinary creditors. Nor is it the case of the petitioner that there are other preferential creditors entitled to take pari passu with the respondent who will be prejudiced by the respondent being allowed to recover forthwith Indeed, in the face of the declaration of solvency which puts the total value of the assets at nearly Rs. 53 lakhs and of the liabilities at Rs. 40.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent in full. The properties will not fetch a fair price if they are sold subject to encumbrances, and, in particular, the stock-in-trade will fetch no price at all in a compulsory sale. It is, therefore, imperative that the secured creditors should be paid off first. That will take some time for that is to be done mainly by the sale of the stock-in-trade. Therefore, until that is done and the assets sold free of encumbrances, the liquidator will not have enough money on hand to pay unsecured creditors like the respondent, whether preferential or ordinary. If, meanwhile, the respondent is allowed to proceed under the Revenue Recovery Act for the realisation of the cess and to attach the assets of the company and bring them to sale the entire winding-up will be gravely prejudiced. The sale being a distress sale and subject to encumbrances will result in the properties being sold at only a fraction of their real value the stock-in-trade will fetch hardly any price at all. The result might well be that, although the respondent might be able to recover the cess, the remaining unsecured creditors will have to go without anything. On the other hand, there seems to be little groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r stay of the proceedings, and not to plead the omission to obtain leave as a bar to the further maintenance of the proceedings, as, in practice, the section has always been worked out by applying to stay the proceedings." It follows that section 518(1)( b ) read with section 446 gives me the power to order a stay Naoshir S. Shenoy v. District Collector of Hyderabad [1965] 35 Comp. Cas. 402, 404 on which reliance is placed on behalf of the respondent considers only the applicability of sub-section (2) of section 518 to proceedings taken by a Collector under the Revenue Recovery Act, and not of sub-section 1( b ). In re Matgot Bywaters Ltd. [1942] 1 Ch. 121 and In re P.P. De Co. [1951] 21 Comp. Cas. 215 decided under the corresponding provisions of the English Act then in force and of the 1913 Act respectively make it clear that finder section 518(1)( b ) the court has the power to stay proceedings of the kind mentioned in section 446(1) against a company in voluntary liquidation. It is argued on the strength of an observation to that effect in Naoshir S. Shenoy v. District Collector of Hyderabad [1965] 35 Comp. Cas. 402 , 404 that the object of the amendment e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate in different fields ; section 537 is an entirely independent section, not merely a section setting out the consequences of a disregard of section 446, and sub-section (2) of section 537 only saves the proceedings mentioned therein from sub-section (1) thereof, not from the operation of section 446. Section 537 is really complementary to section 442 and not to section 446. Under section 442 the appropriate court may, at any time after the presentation of the winding-up petition and before the winding-up order has been made, stay or restrain proceedings against the company. But, in the absence of such stay or restraint, the court seized of the proceeding would have jurisdiction to proceed with it and to decide it. Where, however, a winding-up order follows, any attachment, distress or execution (but not other legal proceedings) put in force, without leave of the court, against the assets of the company, after the commencement of the winding-up, in other words, after the presentation of the winding-up petition, is rendered void by section 537 notwithstanding that there was no stay or restraint ordered under section 442. But, once a winding-up order has been made, the commencement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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