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TMI Blog1988 (9) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... limited company, leased out, vide lease deed dated September 20, 1982, its premises along with office-cum-machinery, etc., in favour of Ajeet Kumar Jain and delivered possession. The company was ordered to be wound up by, order dated November 3, 1983, of the company judge of this court in Company Petition No. 100 of 1982 and the official liquidator was directed to take possession of the assets of the company. The company, before it went into liquidation, had taken some loans from the Bank of India, which instituted Civil Suit No. 118 on March 31, 1983, against the company as well as against the aforesaid Shri Ajeet Kumar Jain, the lessee, and the firm, Jaysons Pharmaceuticals. The requisite permission of the company judge under the provisions of section 446 of the Companies Act, 1956, to prosecute the suit was taken during its pendency and the suit was ultimately decreed on June 4, 1986, in the sum of Rs. 63,92,247.84 with future interest against the company in liquidation as well as against its erstwhile directors. The plaintiff-bank then filed an application, dated January 22, 1987, for the execution of the decree, under Order XXI, rule II of the Code of Civil Procedure, withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different fields. Mr. L.M. Suri, learned counsel for the respondents, on the other hand, maintained that the execution proceedings being a continuation of the suit, no fresh leave under section 537 of the Companies Act was required, as leave in the present suit was already obtained from the company court under the provisions of section 446 of the Companies Act. He has also relied upon the decision of the Bombay High Court in Dhanraj G. Bhatia v. Janata Works P. Ltd. [1984] 56 Comp. Cas. 229 . The findings of the Supreme Court in Bansidhar Shankarlal v. Mohd. Ibrahim [1971] 41 Comp. Cas. 21 were also referred to in this regard. For a proper understanding of the controversy between the parties, it would be worthwhile to reproduce the provisions of sections 446 and 537 of the Companies Act. Section 446 runs as under : "(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 cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order ; whereas the provisions of section 537 are attracted even prior to the passing of the order of winding up of a company, but after the commencement of such proceedings and relating to a particular class of cases, i.e , attachment, distress or execution of a decree against the estate or effects of the company. It also makes the sale of the property without the leave of the court to be void ; whereas, under section 446 of the Companies Act, there is no such provision which makes the judgment or decree or order passed in a proceeding or suit void ab initio even though the leave of the company judge has not been taken. Thus, in a way, it can be well said that the provisions of both these sections operate in different fields, the breaking point being the commencement of the proceedings for winding up of a company before the company judge and the passing of the winding up order in such proceedings. The Legislature had safeguarded the interest of the creditors and shareholders of the company regarding which winding up proceedings had commenced by providing under section 537 of the Act for the prior leave of the company judge regarding the sale of, or distress against, the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Dhanraj G. Bhatia's case [1984] 56 Comp. Cas. 229 had held that once leave to prosecute the company in liquidation has been obtained under section 446 of the Companies Act, no further leave is required to be obtained to execute the decree in suit. It was further held that the provisions of section 537 of the Companies Act necessarily would apply only to those cases where execution is sought to be levied, after the order of winding up, of a decree obtained before the order of winding up is passed. Reliance in that case was placed on the findings of the Supreme Court in Bansidhar Shankarlal's case [1971] 41 Comp. Cas. 21 . Though the Supreme Court had not considered the provisions of section 232 of the old Act, which are analogous to the provisions of section 537 of the new Act, the Supreme Court judgment to the following effect was quoted in extenso, which runs as under (at page 232 of 56 Comp. Cas.) : "It is intended to ensure that the assets of a company ordered to be wound up by the court shall be administered for the benefit of all the creditors, and that some creditors only shall not obtain an advantage over others by instituting or prosecuting proceedings agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Official Liquidator, Peoples Bank of Northern India Ltd. [1943] 13 Comp. Cas. 1 had clinched the controversy as to whether the leave of the company judge obtained through an application filed within the period of limitation and the leave granted after the expiry of the period of limitation would cure the illegality and the suit should not be dismissed for not taking leave of the court before filing the same, even though the company went into liquidation before the institution of such suit. Moreover, in the present case, the property of the company sought to be sold, vide impugned order dated August 22, 1987, of the executing court being under simple mortgage with the bank decreeholder, the latter had the first charge upon this property qua the remaining creditors of the company except the arrears of tax, etc., due to the State. The liquidator appointed by the company judge is taking active steps in these execution proceedings on behalf of the company. Under these circumstances, it cannot be said that the leave of company judge taken under section 446 of the Companies Act during the pendency of the parent suit will not enure during the execution proceedings of the decree pas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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