9911796707
TMI Blog1985 (3) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... n the file of the Civil Judge, Davangere. The suit was decreed on March 23, 1979, and in Execution Case No. 1341 of 1980, which was filed on December 10, 1980, the first respondent sought for the sale of the mortgaged properties in satisfaction of the decree against the company (in liquidation). Accordingly, the properties were brought to sale on August 25, 1981, the sale was confirmed on August 29, 1981, and the sale certificate was subsequently issued in favour of the second respondent auction purchaser. The auction purchaser purchased these properties for a sum of Rs 1,75,000, though it is the case of the applicant that the properties measuring three and a half acres of vacant land and two factory sheds as also a guest house situate therein could have easily fetched Rs 5 lakhs at the market value prevailing then. The grievance of the applicant is that he was deputed as an official to work for the company (in liquidation) and he had no personal interest in the loan transaction between the first respondent and the company. On account of his official position as an officer deputed to work for the said company, he had to sign as a guarantor and as guarantor, there is a decree agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon to interpret the meaning of the words "leave of the court "which occur in section 446(1) of the Act. Section 446 of the Act corresponds to section 171 of the earlier Act, namely, the Indian Companies Act, 1913. In that case, the decreeholder-plaintiff had obtained a mortgage decree on a mortgage executed by defendants Nos. 1 to 4 for a sum of Rs 7,600. After this mortgage, defendants Nos. 1 to 4 had sold the equity of redemption to defendants Nos. 5 and 6 with a direction to redeem the mortgage. Defendants Nos. 7 to 11 in the suit were alienees of the half share of the equity of redemption sold to the sixth defendant. The fifth defendant had created an equitable mortgage in favour of the Hanuman Bank in 1946 over the half share sold to him by defendants Nos. 1 to 4. In the year 1947, Hanuman Bank went into liquidation. The suit on the mortgage was filed on March 1, 1950, and Hanuman Bank got itself impleaded as the sixteenth defendant in that suit by reason of the equitable mortgage in its favour. Among the many contentions raised by the Hanuman Bank, there was a prayer that the properties over which it had an equitable mortgage should be sold last. A decree was passed for Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 537 is kept in view, the decision of the Madras High Court does not appear to be a correct view on the interpretation of section 537 of the Act. In my view, the provisions of section 446 and the provisions of section 537 operate in different fields. Section 446 is a general provision dealing with all suits and legal proceedings which are yet to commence or pending oh the date of the winding-up order. Whereas, section 537 deals with a limited class of cases where the attachment or the sale of the properties of the company is made without leave of the court when that company is being wound up subject to supervision of the court. So the next point for consideration is, what is the meaning of the words "commencement of winding-up" in section 537(1) of the Act. This does not present any difficulty in view of the statutory definition found in section 441 of the Act. It is not in dispute in this case that the winding-up order was made under section 433( e ) of the Act read with section 439 of the Act. Therefore, it is a case of winding-up of a company by the court. The relevant provision under section 441(2) of the Act reads as under: "In any other case, the winding-up of a company b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any tax or impost or any dues payable to the Government are not on that account void, the former cannot be regarded as requiring leave of the court for the commencement or the continuance of such proceedings. But then the two provisions are really designed to operate 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 subsection (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 proceedings 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 com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hapter relates to proof and ranking of claims in the course of winding up. The provisions of sections 528 to 536 make it clear that the Act has prescribed provisions for proving debts of all descriptions, for the application of insolvency rules in winding-up of insolvent companies, preferential payments, provisions relating to preferential creditors, avoidance of fraudulent preference, and voluntary transfer and avoidance of transfer of shares after the commencement of winding-up, etc . Section 537 is one such provision which gives protection to any aggrieved person to avoid any attachment or execution or sale effected by the civil courts without the leave of the company court when the company is being wound up. In the circumstances, the provisions of section 537 have no bearing at all on the provisions of sections 433 and 439 of the Act. If that be so, the language of section 537 gives room for no doubt that any person who is affected by any attachment or sale of the property of the company in liquidation without the leave of the company court can invoke the said provisions. The applicant as a guarantor of the loan due to the first respondent-bank is greatly prejudiced by the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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