9911796707
TMI Blog1968 (10) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... of the execution of the decree passed in favour of the first respondents against the company by the Bombay City Civil Court in Suit No. 4234 of 1968 on July 18, 1968, and for restraining the first respondents from taking any steps or proceedings in execution thereof. In view of the arguments advanced in support of some of the contentions raised on this summons, I propose to set out the facts in greater detail than would have otherwise been necessary. The company was incorporated on August 18, 1967. The main objects for which the company was established are to carry on the business of manufacturers, buyers, sellers and distributing agents of and dealers in all classes of patent, pharmaceutical, medical and medicated preparations, patent medicines, toilet requisites and cosmetics. The registered office of the company is situate at 22, Mahalaxmi Chambers, Bhulabhai Desai Road, Bombay 26. The company also has a godown situate at Hind Rajasthan Estate, 229, Naigaum Cross Road, Bombay. On July 9, 1968, the applicants presented Company Petition No. 87 of 1968 to wind up the company. The applicant's case as set out in the petition is that by an agreement dated December 16, 1967, the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of an aggregate amount of about Rs. 16,000 and furniture and fixtures in the company's registered office and raw materials, machinery and 22 formulae of the products manufactured by the company, all of which are of the value of about Rs. 2,00,000. It is further alleged in the petition that the products of the company were being manufactured by the British Drug House Private Limited under an agreement which was terminated in or about May, 1968, and thereafter the production of the company's products has completely stopped. The issued, subscribed and paid-up capital of the company is Rs. 300 out of the authorised capital of Rs. 5,00,000 divided into 5,000 shares of Rs. 100 each. The company had originally three directors, W.F. Young, who was the managing director, Glen C. Macmohan and J. Singh. According to the applicants the said Macmohan left India permanently in or about February, 1968, while the said Singh resigned as director in or about June, 1968, and the said Young suddenly absconded from Bombay some days prior to the filing of the petition and that there is since then no other director or responsible person in effective management and charge of the company's affairs. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts enclosed for the company's confirmation a statement of account showing the said amount due as at the end of April, 1968. The company returned a copy of the said statement duly confirmed. After filing the suit, on July 3, 1968, the first respondents applied for an attachment before judgment of the company s movable property, viz ., furniture, fittings and stock-in-trade, lying at the company's office premises and the raw materials lying at the company's godown and the goods lying with the said British Drug House Private Lid. and of the moneys lying in the company's bank account with the Bank of America, Bruce Street Branch, Bombay. The said application was supported by an affidavit of one Baji Nariman, the managing director of the first respondents, to which was annexed an affidavit of one Par viz Jal Sonavalla, a representative and bill collector of the first respondents. Both the said affidavits were solemnly affirmed on July 3, 1968. Mr. H. G. Advani, learned counsel for the first respondents, has admitted that the affirmation of the said affidavits was a mistake and instead what was stated in the said affidavits ought to have been on oath inasmuch as the said Nariman and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j Gopalan, who was present, had informed him that the company's directors, the said Young and Miss Annfoo, had not attended the office on that day and that there was no way of contacting them. On the strength of these affidavits, on the same dry, viz ., July 3, 1968, two orders of attachment before judgment were made. By each of the said orders the company was ordered to furnish security in the sum of Rs. 25,000 and to place the same at the disposal of the said court in satisfaction of any decree which might be passed against the company or to appear on July 11, 1968, to show cause to the contrary and, in the meantime, by one of the said orders, the Registrar of the said court was ordered to issue a warrant of attachment before judgment under Order XXXVIII, rule 5 and Order XXI, rule 43, of the Code of Civil Procedure, attaching the movable property, viz ., furniture, fittings and stock-in-trade belonging to and lying at the company's office premises in its possession and raw materials belonging to and lying at the company's godown in its possession and the goods belonging to and lying in the company's possession at the premises of the said British Drug House Private Limited t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the present judge's summons was taken out. On the same day an order was passed staying the said suit and restraining the first respondents from proceeding or continuing with it or from taking any further proceedings therein pending the hearing and final disposal of the said summons. On that day the only substantive prayer was for staying the said suit and restraining the first respondents from proceeding or continuing with it or taking any further proceedings in the said suit pending the said winding-up petition. The applicants were apparently unaware of the said attachments before Judgment obtained by the first respondents or of the said decree passed in favour of the first respondents. At the hearing of the summons, on this fact being brought out in the affidavit in reply filed on behalf of the 1st respondents the summons was amended to incorporate a further prayer to restrain the 1st respondents from taking any steps or proceedings in execution of the said decree pending the hearing and final disposal of the said company petition. I will now summarise the rival contentions raised on this summons. The applicant's contentions are that: ( a )the orders of attachment before ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court or in any High Court, apply to the court in which the suit or proceeding is pending for a stay of proceedings therein ; and ( b )where any suit or proceeding is pending against the company in any other court, apply to the court having jurisdiction to wind up the company, to restrain further proceedings in the suit or proceedings; and the court to which application is so made may stay or restrain the proceedings accordingly, on such terms as it thinks fit. 446. Suits stayed on winding-up order. (1) 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. (2) The court which is winding up the company shall, notwithstanding anytning contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of ( a )any suit or proceeding by or against the company ; ( b )any claim made by or against the company (including claims by or against any of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the winding up order was setaside and on the same day the official liquidator was appointed provisional liquidator. After the provisional liquidator was appointed an ex parte decree was passed against the said company in a suit filed on the Original Side of the Calcutta High Court by Roopnarain Ramchandra Private Ltd. The said company acting through its directors applied to set aside the said ex parte decree. The contention of the said company was that the ex parte decree was a nullity because the court had no jurisdiction to pass the decree by reason of the appointment of the provisional liquidator since no leave of the court had been obtained to proceed with the suit. A preliminary objection was taken by the plaintiffs that the application was not maintainable as it should have been made by the provisional liquidator. This objection was upheld by the learned judge who held that: "The only person competent to make an application after there has been appointment of the provisional liquidator is such person and not the company". Relying upon this passage Mr. Advani has submitted that the judge's summons ought to have been taken out by the provisional liquidator and that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when a provisional liquidator is appointed and his powers in that behalf are not restricted, any legal proceeding can only be instituted by the provisional liquidator but in the name and on behalf of the company. In Dawsons Bank Ltd. v. Nippon Menkwa Kabushaki Kaisha ( Japan Cotton Trading Co. Ltd. [ 1935] 5 Comp. Cas. 191 (PC)) , their Lordships of the Privy Council pointed out that the change which liquidation proceedings bring about in regard to a suit against a company is that in the conduct of its defence the company would, before liquidation, act through the directors and during liquidation through the liquidator. When a company is ordered to be wound up or a provisional liquidator appointed, any legal proceeding by a company, therefore, has to be instituted, by the official liquidator or the provisional liquidator, as the case may be, but in the name and on behalf of the company and the directors will have no right to institute such legal proceeding since the company no more acts through its directors, and when the learned judge held that the only person competent to make the application was the provisional liquidator and not the company, he really meant no more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnish security. The words "or to appear and show cause why he should not furnish security" must necessarily mean that the direction given to furnish security must be at or about the time when the application for attachment before judgment is made and before notice is directed to be given to the defendant and before the defendant is heard. Sub-rule (3) of Order XXXVIII, rule 5, provides that the court may also in the order direct the conditional attachment of the whole or any portion of the property specified. The order referred to in this sub-rule is the order directing the defendant to furnish security or to appear and show cause why security should not be furnished. This is further borne out by the use of the word "conditional" in Order XXXVIII, rule 5(3). Under that sub-rule, the order of attachment is conditional, because the attachment ordered to be made would be ordered to be withdrawn under Order XXXVIII, rule 6(2), when either the defendant shows cause or furnishes the required security. It is in the discretion of the court, depending upon the facts of each case, whether at the time of issuing the notice and directing the defendant to furnish security or to appear and sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een strenuously debated at the Bar, viz ., whether the attachment in this case falls within the scope of clause ( a ) of section 537(1) of the Companies Act. It is the first respondents' case that what is avoided under section 537(1) is an "attachment, distress or execution put in force" without leave of the court against the estate or effects of the company, after the commencement of the winding-up. In the present case, if the company were ordered to be wound up under section 441(2), the winding-up would be deemed to commence on the presentation of the winding-up petition, viz ., on July 9, 1368. In Mr. Advani's submission the attachment before judgment levied by the first respondents was prior to that date and hence not hit by clause ( a ) of section 537(1) and accordingly the first respondents were entitled to proceed with and complete the attachment or execution put in force" any them without obtaining leave of the court; for, according to Mr. Advani, if no leave of the court was necessary even after the company was ordered to be wound up, no purpose could be served by staying further proceedings in execution of the decree obtained by the first respondents pending the hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct the conditional attachment of the whole or any part of the property so specified. Under rule 6 if the defendant fails to show cause why he should not furnish security, or fails to furnish the security required within the time fixed by the court, the court may order the property specified or such portion thereof as appears sufficient to satisfy my decree which may he passed in the suit to be attached. Where the defendant shows such cause or furnishes the required security, and the property specified or any portion of it has been attached conditionally by the court, the court may order the attachment to be withdrawn, or make such other order as it thinks fit. Rule 7 provides that "save as otherwise expressly provided, the attachment shall be made in the manner provided for the attachment of property in execution of a decree". Rule 8 provides for investigation of claim to property attached before judgment and provides that such claim should be investigated in the same manner as provided for the investigation of claims to property attached in execution of a decree for the payment of money, i.e. , in the manner provided by Order XXI, rules 58 to 63. Order XXXVIII, rule 9, pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he essential purpose of Order XXI is to see that the process of the court is not defeated once execution starts. It is for this reason that separate provisions have been made in the Code for attachment before judgment and attachment in execution proceedings. The provisions of Order XXXVIII clearly show that it is a self-contained and a complete provision by itself and it is only in certain procedural respects that the provisions of Order XXI relating to attachment are made applicable to attachment before judgment. This brings me to the difficult question of what happens to an attachment before judgment when a decree is passed in favour of the plaintiff. The only provision of the Code dealing with this situation is rule 11 of Order XXXVIII which provides that: "Where property is under attachment by virtue of the provisions of this order and a decree is subsequently passed in favour of the plaintiff, it shall not be necessary upon an application for execution of such decree to apply for a re-attachment of the property". Mr. Advani, learned counsel for the first respondent, has submitted that the combined effect of rules 7 and 11 of Order XXXVIII is that on a decree being passed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. Thus an application for execution by a decree-holder is a sine qua non for setting into motion the process of the court by which a court's decree is executed. Order XXI, rule 10, provides for an application for execution to be made to the court which passed the decree or to the court to which the decree is transferred for execution or to the officer of the court appointed in that behalf. Order XXI, rule 11(2), provides that an application for execution of a decree is to be in writing signed and verified, and prescribes the particulars to be set out therein. Amongst the particulars required to be specified are the date of the decree, whether any appeal has been preferred from the decree, whether any, and, if so, what payment or other adjustment of the matter in controversy has been made between the parties subsequent to the decree and what previous applications for execution of the decree have been made and their results as also in which of the modes specified in section 51 the assistance of the court is required. Under rule 146 of the Rules of the Bombay City Civil Court, 1948, all applications for execution of decrees or orders are to be made to the Registrar of that court a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the receipt of such assets, he has made an application for execution of his decree passed against the same judgment-debtor. I will now turn to the authorities. In Pallonji Shapurji Mistry v. Edward Vaughan Jordan [1888] I.L.R. 12 Bom. 400 , the question which fell for the court's determination was whether the holder of an attachment before judgment, who had obtained a decree in his favour subsequently, was entitled to rank as an applicant in execution against the property attached so as to become entitled to rateable distribution without applying for execution. The provisions for rateable distribution under the old Code were to be found in section 295 and were materially the same as those in section 73 of the present Code. The provision corresponding to the present Order XXXVIII, rule 11, was section 490 which provided that where property is under attachment by virtue of the provisions of this Chapter, and a decree is given in favour of the plaintiff, it shall not be necessary to re-attach the property in execution of such decree. The argument by the decree-holders who had obtained an attachment before judgment was that by reason of the provisions of section 490, no appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J. agreed, held that under Order XXXVIII, rule 11, property attached before judgment did not become property attached in execution of a decree upon the mere passing of a decree, for execution may never be applied for, but it merely enabled the decree-holder to apply for execution by sale of the attached property without a fresh attachment. Where, however, there was an order in execution for the sale of the attached property, the property was to be considered as attached in execution by virtue of Order XXXVIII, rule 11, and a claim put in after such an order might properly be regarded as a claim to property attached in execution of a decree within the meaning of article 11. Spencer J., who gave a separate but concurring judgment, held that once a decree was passed and an attempt made to execute it, what was an attachment before judgment became in effect an attachment in execution of a decree by reason of Order XXXVIII, rule 11, and as attachment is the first step in the execution of all decrees against property, just as sale or delivery of property is the las step, the effect of Order XXXVIII, rule 11, was that execution is made to date back to the first attachment which was before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrary to that of the Madras High Court was taken in Moti Jha v. Jowala Prasad Marwari [1937] ILR 16 Pat. 589; AIR 1937 Pat. 626, Bohra Akey Bern v. Basant Lal [1942] ILR 46 All. 894; AIR 1924 All. 860, Abd.ul Hamid v. Mussammat Asghari Begum [1953] ILR 1 All. 654; A.I.R. 1953 All. 173 (FB), Ayezali Mir v. Mahanandabarui AIR 1949 Cal. 320 and Shibnath Singh Ray v. Sheikh Saberuddin [1929] ILR 56 Cal. 416; AIR 1929 Cal. 465. So far as this High Court is concerned, in two cases under the present Code, viz ., Ardeshir Nusserwanji Dossabhoy v. Usman Gani Memon [1929] 31 Bom. LR 1101 ; AIR 1929 Bom, 455 and Hari Sabaji Kamat v. Shrinivas Vithal Pal [1931] 33 Bom. LR 1130; AIR 1931 Bom. 550, the majority view in the Full Bench case of Meyyappa Chettiar v. Chidambaram Chettiar [1924] ILR 47 Mad. 483 (FB) was adopted. The first was the decision of Madgavkar J., sitting singly, while the second was the decision of a Division Bench. The same question, viz ., whether Order 21, rule 57, applied to an attachment before judgment came up for consideration before another Division Bench of this High Court in Dattatraya Baliram Naik v. Rambhabai Jairam Pati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he word "attachment" in clause ( a ) of section 537(1) means an attachment the purpose of which is to realise the decretal claim, i.e. , an attachment in execution, and does not include an attachment before judgment, for the object of an attachment before judgment, as pointed out earlier, is different from the object of an attachment in execution. In the present case the attachment before judgment having been already levied before the winding-up petition was filed, there is no question of the property being attached again in execution for the purpose of executing the decree. Accordingly, the question of any attachment within the meaning of clause ( a ) of section 537(1) being put in force against the property of the company does not and will not arise in this case. In view of some doubt that prevails as to when an attachment, distress or execution can be said to be put in force, as I will point out late r, I do not propose to decide at what precise stage hereafter the execution will be put in force as it is not necessary for the purposes of the present application to do so, but at whatever stage it is put in force, it will be after the commencement of the winding up and hence woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Advani has relied upon the construction placed upon the corresponding section 232 of the old Indian Companies Act, 1913, prior to its amendment by the Indian Companies (Amendment) Act, 1936, by the Allahabad High Court in Kayasth Trading Bunking Corpn. v. Sat Narain Singh AIR 1921 All. 149, 150 . The old section 232 provided as follows: "(1) Avoidance of certain attachments, executions, etc. Where any company is being wound up by or subject to the supervision of the court, any attachment, distress or execution put in force without leave of the court against the estate or effects or any sale held without leave of the court of any of the properties of the company after the commencement of the winding up shall be void. (2) Nothing in this section applies to proceedings by the Government". As originally enacted, section 232 did not contain the words "or any sale held without leave of the court of any of the properties". In Kayasth Trading and Banking Corporation's case ( supra ) the facts were that, long prior to the presentation of the winding up petition against the company, certain property belonging to the company was attached in execution of a decree. The pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the meaning of this section long prior to the 26th of February, 1920. It was in fact put in force for the purposes of this section when this particular property was attached". I have been referred to only one English authority which has placed this construction on the expression "attachment, distress or execution put in force", namely, Ex parte Parry : In re Great Ship Company Ltd. [1863] 33 L.J, Ch. 245. In that case a creditor of an unregistered company sued for his debt and after long hostile litigation obtained judgment and issued a writ of fieri facias which was duly executed by the Sheriff by seizure. Thereafter a petition was presented for winding up the company and an ex parte order was made to restrain the sale by the Sheriff of the property seized. On appeal, it was held that this was not a case where a stay ought to be granted seeing that the creditor had obtained his judgment after great opposition, execution issued upon that judgment, property seized under the execution, and nothing to stop it, except the power given to the court under the Companies Act, 1862. Knight Bruce L.J. did not express himself upon the point but according to Turner L.J., as the wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ani has submitted that by this amendment the legislature introduced an altogether new provision and not that it did accept as correct the decision of the Allahabad High Court. This argument does not appear to be correct. Clause 85 of the statement of objects and reasons states that section 232 had been construed as not covering sale held after the winding up and that the amendment was designed to forbid such sale (see Gazette of India, 1936, Part II, page 98). In M.K. Ranganathan v. Government of Madras [1955] 25 Comp. Cas. 344 ; AIR 1955 SC 604., Bhagwati J. pointed out that in Baldeo Narain Singh v. United India Bank Ltd. AIR 1916 Pat. 47, a contrary decision was reached by the Patna High Court in circumstances exactly similar to those before the Allahabad High Court and that this conflict was resolved and the decision of the Allahabad High Court got over by amending section 232. This, on the contrary, shows that the legislature did not act with the intention of introducing a new provision in the Companies Act, but, as the legislature preferred and approved the Patna view, it wanted the law to be brought in line with it so as to make express its original intention in enac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the words can and should be held to cover distress and execution proceedings in the ordinary courts. In our view, such proceedings are other legal proceedings against the company, as contrasted with ordinary suits against the company". The position under the Companies Act, 1956, is the same. Under the 1956 Act, section 446 requires leave of the court for commencing a suit or other legal proceeding including an execution proceeding when a winding-up order has been made or provisional liquidator appointed or for proceeding with any suit or other legal proceeding including execution proceedings against the company pending at the date of the winding-up order. Section 537 lays down the consequences of adopting certain specified proceedings against the property or effects of the company without leave of the court after the commencement of the winding up and in terms makes such proceedings void. From this, however, the converse that if a proceeding had started, prior to the commencement of the winding up, it can continue without Lave of the court does not follow. The consequence of non-compliance with section 446 is not to be found only in section 537. While section 446 deals generally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The facts in the last mentioned case were that prior to the amendment of section 232 by Act 22 of 1936, the sale of a company's property had taken place after the winding-up order in pursuance of an attachment effected before the commencement of the winding up. It was submitted that, even apart from the provisions of section 171, under the provisions of the unamended section 232 the sale was void. Negativing this contention the court held that the leave required under section 232 was to be sought only when execution came to be enforced against the estate or effects of the company, viz ., at the time of attachment, and that what was prohibited by that section was the process of attachment against the estate or effects of the company without leave of that court. If, therefore, the execution had already been put in force against the estate or effects of the company, when no leave of the court was necessary as contemplated under section 232, then that execution was free to proceed to its logical conclusion without being hit by that section notwithstanding the fact that thereafter there was actually a commencement of the winding up. The court derived support for the conclusion it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property and require that at the stage when the sale is to be held, fresh leave of the court should be asked for. The same would apply to other modes of execution. Thus there would not be any irrationality or illogicality in holding that for completing execution on a property attached before the commencement of the winding up, leave of the court is required to sell or take other steps in execution against the attached property after the winding up has commenced. The attention of the learned judges of the Patna High Court does not appear to have been drawn to the judgment of the Supreme Court in M. K. Ranganathan v. Government of Madras [1955] 25 Comp. Cas. 344 ; AIR 1955 S.C. 604 , where the circumstances which led to section 232 being amended, and the evil which was sought to be remedied thereby were pointed out, viz ., to get over the judgment of the Allahabad High Court and the complications that followed as a result thereof. That is a quite different thing from the legislature accepting that judgment as correctly interpreting the unamended section 232. But even according to the Patna. decision, a sale held after the commencement of the winding up of property of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded section 232 in section 537 of the Companies Act, 1956, only the position with respect to sale following upon attachment has been altered, but all other modes of execution remain unaffected and the first respondents are, therefore, free to proceed against the. moneys lying in the company's account with the Bank of America, which have been attached, by issuing a garnishee notice against the bank without leave of the court. It is also the first respondent's contention that any such proceedings would not be a proceeding against the company but against the garnishee, i.e. , the bank, and, therefore, since leave is required only for taking a proceeding against the company, no leave would be required for adopting garnishee proceedings against the bank. Neither of these contentions can be accepted. Execution is either against the person or the property of the judgment-debtor. The moneys in the company's bank account have been attached because they are moneys belonging to the company, and it is because they are moneys belonging to the company that the bank will be called upon by a garnishee notice to deposit them in court in satisfaction of the decree obtained by the first respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mence. This is not just the continuance of the prohibitory order under Order XXI, rule 46, but the commencement of a legal proceeding, though before an application for the issue of a garnishee notice can be made, the debt must first be attached under Order XXI, rule 46. Rule 46B provid3s as follows: "46B. Consequences of default in appearance of the garnishee. Where the garnishee does not forthwith pay into court the amount due from him to the judgment-debtor or so much thereof as is sufficient to satisfy the decree and the costs of the execution or does not appear and show cause in answer to the notice, the court may order the garnishee to comply with the terms of such notice, and on such order execution may issue as though such order were a decree against him". Rules 46C to 46E deal with a case where a garnishee disputes his liability or it appears to the court that the debt belongs to some third person or that any third person has a lien or charge or any other interest over such debt and for the determination of the question that would then arise. Rules 46F, 46G and 46H are as follows : "46F. Payment by garnishee under orders of court to be valid discharge to the garnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decree-holder. Under rule 146 of the Rules of the Bombay City Civil Court Rules all applications for execution are to be made to the Registrar who has thereupon to issue the necessary warrants and notices. The garnishee notice is to be issued in Forms 53, 54 or 55 of the Forms set out in the Rules of the Bombay City Civil Court Rules as may be applicable. Each of these forms also refers to an application for execution having been made. Mr. Advani has also relied upon the decision of the Kerala High Court in Lukka Varghese v. Devasia Varkey AIR 1965 Ker. 47 , in support of his submission that garnishee proceedings against the Bank of America would be proceedings only against the garnishee and not against the company. That decision lays down no such proposition as canvassed by Mr. Advani. In the Civil Procedure Code as applicable in the State of Kerala rules 46A to 46-I have been inserted in Order XXI. These Rules are similar to rules 46A to 46H inserted in Order XXI by our High Court. In the case before the Kerala High Court a garnishee notice was issued and was made absolute and an order was made under Order XXI, rule 46B, against the garnishee to deposit the amount in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led. The fact that the property may not be in the company's possession is irrelevant. If it is property or actionable claim to which the company is or appears to be entitled, the provisional liquidator is entitled to take it in his custody or under his control. In this connection Mr. Advani has relied upon Fatechand Tarachand v. Par ashram Maghanmal AIR 1953 Bom. 101 , a case under the Presidency Towns Insolvency Act, 1909. In that case in execution of a decree by attachment and sale, the stock-in-trade of the judgment-debtor was attached by the Sheriff by seizure under Order XXI, rule 43. Subsequently, the judgment-debtor was adjudicated an insolvent. The attachment was, however, withdrawn at the instance of the judgment-creditor who thereafter filed a fresh application for execution by sale of the property without attachment and a warrant of sale under Order XXI, rule 64, was issued. The official assignee thereupon took out a chamber summons to quash and set aside that warrant and for an order directing the Sheriff to hand over possession of the property to him on the ground that it had vested in him under section 52(2)( c ) of the Presidency Towns Insolvency Act. Under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing creditor a secured creditor or creates any charge or lien in his favour over the property attached. But an attaching creditor acquires, by virtue of the attachment, a right to have the attached property kept in custodia legis for the satisfaction of his debt, and an unlawful interference with that right constitutes an actionable wrong". Mr. Advani, learned counsel for the first respondents, has, however, submitted to the contrary and has referred to Goverdhandas Vallabhdas v. Official Liquidator, Electro-Metal Refining Co. Ltd. AIR 1930 Bom. 16,21 , in support of his submission and in particular has placed considerable emphasis upon the following passage in the judgment of Marten C.J.: "The result then of the whole case, in my opinion, is that even if the applicant fails to establish his claim to be a secured creditor which technically he seems not to be and if his real position was only that of an attaching creditor, yet he has apparently lost that position by reason of the events that have happened. There is, at present, no application before the court to allow him to proceed with his rights in execution as an attaching creditor, if any. Under those circumstances h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the attaching creditor was a secured creditor who would stand outside the winding-up. Lastly, Mr. Advani has submitted that in the circumstances of this case the court in its discretion should refuse to stay proceedings in execution of of the decree obtained by the first respondents. Three circumstances have been relied upon by Mr. Advani. The first circumstance is that the first respondents are decree-holders and execution has already been put in force against the properties of the company. In this connection Mr. Advani has relied upon Ex parte Parry : In re Great Ship Company Ltd. [1863] 33 L.J. Ch. 245 in which it was opined that in the circumstances of that case since judgment had been obtained after great opposition, execution issued upon that judgment and property seized under the execution before the presentation of the winding-up petition, if an application for stay had been made, the court would have refused the stay. I have already held that in the present case execution has not been put in force. The decision in Ex parte Tarry : In re Great Ship Company Ltd [1863] 33 LJ Ch. 245 has, therefore, no application to the present case. Apart from this, sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fference. The same argument would apply to every application for stay made in the interval between the appointment of a provisional liquidator and the making of a final order on the winding-up petition where an attachment has been effected before the filing of the winding-up petition. To accept this argument would be tantamount to laying down an exception to section 442 in the case of such an attaching creditor which the Legislature never intended. In In the matter of the Rajhari Ice Factory Ltd. [1937] 41 CWN 597 the Calcutta High Court held that an attachment of the assets of a company which is subsequently wound up and which attachment had not been completed by sale, cannot be treated as having been completed before the commencement of the winding-up so as to allow the attachment to prevail over the interest of the creditors as a whole. The third circumstance relied upon by Mr. Advani is the change made in the language of section 446 from that used in the corresponding section 171 of the old Companies Act of 1913. Under the old section 171 leave of the court was necessary both for commencing as well as proceeding with a suit or other legal proceeding against the company wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same class must be paid pari passu. This can hardly be given effect to if to-day the first respondents were permitted to execute their decree. There are no special or exceptional circumstances present in this case as would induce the court to depart from its usual practice. In fact all the circumstances are such as would, on the contrary, induce the court to stay the proceedings. The City Civil Court suit was filed and the attachment before judgment obtained at a time when the company was in insolvent circumstances, was attempting to dispose of its properties and here was no responsible person in charge of the company and criminal proceedings were pending against some of its directors. In these circumstances, it would have been apparent to anybody that a winding-up petition was imminent. The decree obtained by the first respondents is an ex parte decree. The company could not even file an appearance as there was nobody in charge of the company. From this I should not be understood to say that I doubt in any way the genuineness of the first respondents' claim. This is a matter for the official liquidator to look into, if the company is ordered to be wound up, at the stage of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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