Case: Bansidhar Shankarlal Vs. Mohd. Ibrahim &amp; Anr

Ramchandra Shukul (ILR 52 ALL 430) Roopnarain Ramchandra Private Ltd. v. Brahmapootra Tea Co. (India) Ltd. and Another. (65 Cal WN 1060)Section 171 of the Indian Companies Act, 1913 provided that -"When a winding up order has been made or a provisional liquidator has been appointed, no suit or other legal proceeding shall be proceeded with or commenced against the Company except by leave of the Court and subject to such terms as the Court may impose."This section is in terms analogous to Section 231 of the English Companies Act, 1948 (11 and 122 Geo. 6 Ch. 38). The object of Section 171 is plain. 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 in advantage over others by instituting or prosecuting proceedings against the company. The section is intended to maintain control of the court which has made an order for winding up on proceedings which may be pending against the company or may be initiated after the order of winding up, and the Court may remain seized of all those matters so that its affairs are administered equitably and in an orderly fashion.6. When the Second Appeal No. 1380 of 1954 was pending before the High Court of Calcutta at the instance of the Company and Bansidhar against the decree passed by the District Court in enjectment, the Company was ordered to be wound up by order of the High Court of Calcutta and the liquidators were appointed. The liquidators prosecuted the appeal. There is no evidence on the record whether the liquidators obtained the sanction of the Court under Section 179(1) (a) of the Companies Act 1913. But there is no reason to suppose that the liquidators did not obtain the sanction of the Court. If sanction of the Court under Section 179 to prosecute the appeal before the High Court was obtained, and it must be so assumed, the contention raised on behalf of Bansidhar loses all significance for an execution applications is only a continuation of the suite and the control of the High Court ensures during the execution proceeding also. It the sanction of the Court has been obtained for the prosecution of the suit, it would be plainly unnecessary to obtain fresh sanction to the institution of execution proceedings at the instance of the successful party. It is true that the sanction obtained by the liquidators is granted under Section 179 of the Companies Act to initiate or enforce a claim of the company or to defend an action, whereas the leave of the Court to institute or to continue a suit against the company in winding up is obtained under Section 171. It would be giving effect to a technicality divorced from the true object of the section to hold that even in a suit filed or prosecuted with the sanction of the Court, the decree may not be enforced by a successful party without leave under Section 171 of the Act.7. Even granting that sanction under Section 179 does not dispense with the leave under Section 171 of the Act, to institute a proceedings in execution against a company ordered to be wound up, we do not think that there is anything in the Act which makes the leave a condition precedent to the institution of a proceedings in execution of a decree against the company and failure to obtain leave before institution of the proceeding entails dismissal of the proceedings. The suit or proceedings instituted without leave of the Court may, in out judgment, be regarded as ineffective until leave is obtained, but once leave is obtained the proceedings will be instituted on the date granting leave.In Buckley on the Companies Act, 13th Edn., at p. 490 it is observed:"Leave to continue after winding up a debenture-holders action, whether previously or subsequently commenced, will be given unless the liquidator is able and willing to give in the winding up the relief which could be obtained in the action."The Calcutta High Court in Suresh Chandra v. The Bank of Calcutta examined the decision of the English Courts in some details and observed that as regards Section 171 of the Indian Companies Act, 1913, the High Court has jurisdiction to grant leave to proceed with the suit or other proceedings against a company in liquidations even if such leave was not obtained for its commencement. The proceedings may at best be regarded as instituted on the date on which the leave was obtained for the High Court.8. Considering the question both on principle and authority we are unable to agree with the view expressed by the Calcutta High Court in Har Narain Misras case (supra) and in Godavari Sugar and Refineries Ltd. case (supra) by the Andhra Pradesh High Court.9. Counsel for the appellant, however, urged that this Court is not concerned in this appeal with the correctness of one or the other of the two conflicting views. Counsel says the Court has only to consider the correctness of the view of the High Court refusing to granted the certificate. In our judgment, it would be a futile exercise if we come to the conclusion that the view taken by the High Court on the merits of the case is true, still to certify the case for appeal. The proposed appeal only involves the question about the maintainability of the execution proceeding commenced by the plaintiff and against the company in liquidation without leave of the High Court which has ordered the company to be wound up. WE entertain no doubt that the High Court was right in the view it has taken on the merits and the contentions raised. We do not think that we will be justified in certifying an appeal in which the only question which may be urged is the on which we have expressed out opinion against the appellant.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]8. Considering the question both on principle and authority we are unable to agree with the view expressed by the Calcutta High Court in Har Narain Misras case (supra) and in Godavari Sugar and Refineries Ltd. case (supra) by the Andhra Pradesh High Court.9.Counsel for the appellant, however, urged that this Court is not concerned in this appeal with the correctness of one or the other of the two conflicting views. Counsel says the Court has only to consider the correctness of the view of the High Court refusing to granted the certificate.In our judgment, it would be a futile exercise if we come to the conclusion that the view taken by the High Court on the merits of the case is true, still to certify the case for appeal. The proposed appeal only involves the question about the maintainability of the execution proceeding commenced by the plaintiff and against the company in liquidation without leave of the High Court which has ordered the company to be wound up. WE entertain no doubt that the High Court was right in the view it has taken on the merits and the contentions raised. We do not think that we will be justified in certifying an appeal in which the only question which may be urged is the on which we have expressed out opinion against the appellant.