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TMI Blog1992 (3) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... r reliefs. By an order dated July 3, 1987, in Company Petition No. 17 of 1984, this court ordered winding up of the company in question, viz ., Radhakrishna Mills Ltd. Pursuant to the winding up order, the official liquidator attached to this court has taken into his custody and control the available assets of the company in liquidation. The applicant in Company Application No. 720 of 1990 is Cotton Corporation of India Ltd., a Government of India undertaking. They filed Suit No. 1291 of 1980 on the file of the High Court of Judicature at Bombay in the year 1980, claiming a sum of Rs. 27,36,851.14 with interest thereon at 20 per cent. per annum till the date of realisation being the loss purported to have been incurred by the said company on account of a breach of contract committed by the company in liquidation, long prior to the passing of the winding up order. The case of the Cotton Corporation of India Ltd., the plaintiff in the said suit, is that though the company in liqidation, some time in the year 1977, contracted to purchase Russian cotton for about Rs. 32 lakhs it failed to honour its commitment and thereby had committed a breach of contract. Since the company in li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company in liquidation by way of attachment before judgment. (2)The applicant, in the event of obtaining a decree in the above suit, cannot proceed against the assets and effects of the company in liquidation and he has to prefer his claim before the official liquidator on the basis of the said decree as an unsecured creditor. While this application was pending, the official liquidator himself has filed Company Application No. 2311 of 1991 under section 446(3) of the Companies Act to transfer the pending suit from the file of the Bombay High Court to this court for disposal of the same by this court. Both the applications were heard together by consent of parties. I have heard the arguments of Mr. M. S. Krishnan on behalf of the petitioner in Company Application No. 720 of 1990 and Mr. S. Srinivasan, the official liquidator on behalf of the company in liquidation. Let me first dispose of Company Application No. 720 of 1990. Before dealing with the same, it is useful to refer to section 446 of the Companies Act, 1956, which is reproduced as under : "446. Suits stayed on winding up order. (1) When a winding up order has been made or the official liquidator has been appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any in winding up against wasteful or expensive litigation in regard to matters capable of being determined expeditiously and cheaply by the winding up court itself. The object of section 446 is to see that the assets of the company are brought under the control of the winding up court to avoid, wherever possible, expensive litigation and to see that all matters in dispute which are capable of being expeditiously disposed of by the winding up court are taken up by that court. This does not, however, mean that all disputes wherein a company is involved should be proceeded with only by the company court or that if they are pending with other statutory bodies, leave of the company court should be obtained. Section 446 is wide in its terms and is not restricted to any category of suits or any classes of plaintiffs. It is wide enough to cover all suits and other legal proceedings, whoever may be the plaintiff. The section does not prohibit proceedings being taken by the company against others. Nor does it prohibit the taking of any proceedings against any directors or officers or other servants of the company. One thing is very clear. Once a winding up order is made, no proceeding can c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. On a formal application being made, the court will examine the facts and circumstances of each case and exercise its discretion judicially and not in a capricious or arbitrary manner. In the exercise of its discretion ,it may grant leave unconditionally or on terms or may refuse it absolutely. Even in the case of a secured creditor who is outside the scope of winding up, and as such, is ordinarily given leave to sue on his security, the court may, on special grounds, refuse leave. In Purushottam and Co. v. Provisional Liquidators, Subhodaya Publications Ltd. [1955] 25 Comp. Cas. 49, 52, our High Court (Ramaswami J.) summed up the working points in terms of the following proposition. The general principles on which leave is granted in an action may be shortly summarised as follows (at page 52) : "The leave of the court cannot be obtained merely for the asking. It is not to be granted automatically or as a matter of course. The court has got to examine the facts of each case separately and exercise its discretion. Such discretion must be exercised reasonably and not arbitrarily or capriciously. In the exercise of its discretion the court may refuse leave even in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard the interests of the general body of creditors, contributories and workmen affected by the liquidation proceedings. In Canara Bank v. Official Liquidator [1991] 70 Comp. Cas. 295 , 301, our High Court (janarthanam J.), while granting leave to the secured creditors, has imposed the aforesaid conditions as has been reproduced by me in paragraph No. 10 supra. In the background of the said principles laid down by our High Court and also by other courts, I am of the view that though the applicant herein has filed the suit before the Bombay High Court and also filed a claim petition before the official liquidator when he called for claims from the creditors of the company, he should be granted leave as prayed for subject to the following conditions. (1)The applicant cannot proceed against the assets and effects of the company in liquidation by way of attachment before judgment. (2)The applicant, in the event of obtaining a decree in the above suit, cannot proceed against the assets and effects of the company in liquidation and he has to prefer his claim before the official liquidator on the basis of the said decree as an unsecured creditor. In so far as the application fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r being examined by the court at Bombay feels that he will not be in a position to have the case conducted at Bombay expeditiously and properly. According to the official liquidator, if the suit is transferred to this court, it would enable him to take such steps as are necessary for expeditious disposal of the suit with a minimum cost. Balance of convenience is also in favour of the suit being tried by this court which is winding up the above said company in liquidation, viz ., Radhakrishna Mills Ltd. Thus, the official liquidator states that, in exercise of powers under section 446, this court shall take on its file the suit pending on the file of the High Court of Judicature at Bombay and dispose of it. This application is resisted by the Cotton Corporation of India Ltd. by filing a counter-affidavit dated February 5, 1992. According to the said company, the company in liquidation is contesting the suit filed by them in the High Court of Judicature at Bombay and the same is ripe for trial. It further states that voluminous documents have been filed by both sides in the suit on the file of the High Court of Judicature at Bombay and if, at this juncture, the suit is transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed would not apply ; ( ii ) that the power under section 446(3) to direct that proceedings pending in another court be transferred to the winding up court was discretionary, but the discretion had to be exercised judiciously and in the interests of all the parties concerned ; ( iii ) that the interests of the creditors and shareholders of the company could be safeguarded only if the suit was tried by the same court which was in charge of the liquidation proceedings ; ( iv ) that since the Additional District Judge had taken all the relevant factors into consideration before ordering the transfer of the suit to his court, the High Court ought not to interfere with his order". In my view, under section 446, the power is only in the winding up court to transfer any proceedings filed against a company which is pending before any other court. This power is discretionary, but the discretion has to be exercised judiciously and in the interests of all the parties concerned. The transfer of case under this sub-section is neither a rule nor an exception. The discretion has to be exercised taking into consideration the facts and circumstances of each case. Thus, considering the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P. H.). That was a case in which an application under section 20 of the Arbitration Act, 1940, was pending in the Jammu and Kashmir High Court before a winding up petition was filed against a company in the Punjab and Haryana High Court. Subsequently, the company was ordered to be wound up by the Punjab and Haryana High Court. Thereafter, an application was filed by the official liquidator before the Punjab and Haryana High Court praying that the proceedings pending in the Jammu and Kashmir High Court be transferred to the file of the Punjab and Haryana High Court in view of the provisions of section 446(3) read with rule 9, because it was not possible for the official liquidator attached to the Punjab and Haryana High Court to pursue the proceedings in the other court effectively. The application was opposed by the State of Jammu and Kashmir. Justice B. S. Dhillon of the Punjab and Haryana High Court has held in that case as follows (headnote) : " Held, that the provisions of section 446(3) of the Companies Act, 1956, read with rule 9 of the Companies (Court) Rules, 1959, have been enacted with a view to give jurisdiction to the company court to deal with all matters concern ..... X X X X Extracts X X X X X X X X Extracts X X X X
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