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TMI Blog1970 (12) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act of 1956, the petitioners have to obtain sanction of the company court for initiating proceedings against the company under Order 8-A of the Code of Civil Procedure. The court below upheld the objection of the respondent and rejected the application on the ground that the application for initiating proceedings under Order 8-A against the company, which is in liquidation, cannot be maintained without the leave of the company court. It is the correctness of the said order which is canvassed in this revision. The learned counsel for the petitioners contends that no leave of the company court is necessary for an application under Order 8-A, rule 1, that a resort to Order 8-A will not amount to initiation of any proceeding against a company as contemplated in section 446 of the Companies Act and that section 446 applies only to original proceedings such as suits, etc ., and not to interlocutory applications in a pending suit. The learned counsel contends that the words "other legal proceeding "in section 446(1) of the Companies Act have to be construed as to denote original proceeding and that they cannot comprehend interlocutory applications in a pending proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mprised within the words "other legal proceeding "occurring in section 171, the income-tax authorities have to apply for leave of the winding-up court before issuing the certificate contemplated in section 46(2) by the Collector for the collection of arrears of income-tax. In view of this decision it is not possible to confine the scope of section 446 only to original proceedings as contended for by the learned counsel for the petitioners. It was then contended on behalf of the petitioners that the Order 8-A, having been invoked by them in defence of the suit filed against them, section 446 of the Companies Act cannot stand in their way. Reliance has been placed on the following decisions : In Andhra Paper Mills Co. Ltd. v. Anand Bros [1951] 21 Comp. Cas. 160, 168; [1951] 1 M.L.J.340 ( Mad.) a Division Bench of this court had occasion to consider whether leave of the company court under section 171 has to be obtained by a defendant for setting up a cross-claim or set off in a suit filed by a company in liquidation, and Rajamannar C.J. had expressed as follows : "On principle and in the interests of fairness and justice we think that a party against whom the company has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that the words "legal proceeding "in section 171 cannot comprehend a claim petition by a third party and that it would be most inequitable for a company in liquidation to institute execution proceedings and rely upon section 171, to debar persons from defending their property in those proceedings, that the object and purpose of section 171 is not to prevent third parties from putting forward their claim to the properties sought to be proceeded against by the company, and that the claim proceeding in the course of the execution proceeding taken by the company itself is in the nature of an independent proceeding by a stranger to the execution petition in vindication of his rights to the property attached, which is only incidental to the main proceeding started by the company itself. Rahmat Ali v. Calcutta National Bunk [1955] 25 Comp. Cas. 112 ; AIR 1955 All. 169 also held that the meaning of the words "other legal proceeding "in section 171 must not be confined within narrow limits, that they need not necessarily refer to proceedings analogous to a suit initiated by means of a petition similar to a plaint, and that the words "against the company "in section 171 me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction to settle disputes between the parties outside the winding-up. This has been so held in In re A Singer and Company ( Hat Manufacturers ) Ltd. [1943] Ch.121;13 Comp.Cas.175 (CA) by the Court of Appeal. In that case in the winding-up proceedings third parties were sought to be brought in under the third party procedure, and the court held that the third party procedure is not applicable to proceedings in winding up of companies. But that will not establish the contrary submission that, for a third party procedure, the leave of the company court is unnecessary. For deciding the question whether leave of the company court is necessary or not, the substance of the claim made by the applicant invoking the third party procedure has to be looked into in the light of the object of section 446. In this case the petitioners not only seek to avoid a decree being passed against them but also seek a decree against the company in liquidation in case the respondent obtains a decree against them in the suit. It is well known that the object of the winding-up is to put all unsecured creditors upon an equality and to pay them pari passu, and to accomplish this, it was indispen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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