Case: Harihar Nath  Vs. State Bank Of India

when leave is granted, proceed with the suit. If the leave is refused, the suit may be transferred to the company court for being tried and disposed of under section 446(2)(a) of the Act. The plaintiff may also file an application for transfer of the suit to the Company Court for disposal under Section 446(2)(a). Alternatively, the plaintiff may get the suit dismissed with liberty to make a claim under section 446(2)(b) of the Act. Even if the suit is proceeded with, without obtaining leave of the Company Court, either not being aware of the order of winding up or ignoring the provisions of section 446(1), the resultant decree will not be void, but only be voidable at the instance and option of the official liquidator of the company. It is also possible that the court passing the winding up order may at any time, on the application either of the liquidator or of any creditor or contributory, make an order staying the winding up either altogether or for a limited time on such terms and conditions as the court deems fit, under section 466 of the Act. When the winding up is so stayed, a suit against the company (filed before the winding up order) which stood stayed under section 446(1) could be proceeded with, even though leave had not been obtained to proceed with the suit. We have referred to these alternative possibilities to show that having regard to the nature of an application under Section 446(1) of the Act, it does not attract Article 137. 19. We may next examine the position by even assuming that Article 137 applied to an application under section 446(1) for leave to proceed with a pending suit. Article 137 is a residuary provision applicable to all applications and petitions filed in a court, for which no period of limitation is prescribed. It prescribes a limitation of three years and the period of limitation begins to run when the right to apply accures". To understand the meaning of the words "right to apply accrues", we may refer to the wording of Article 137 and a few other Articles in the Schedule to the Limitation Act: ArticleDescription of suitPeriod ofTime from which period begins No.Limitationto run 137Any other application for which no3 yearsWhen the right to period of limitation is providedapply accrues. elsewhere in this division. 113Any suit for which no period of3 yearsWhen the right to limitation is provided elsewhere insue accrues. this Schedule. 58To obtain any other declaration.3 yearsWhen the right to sue first accrues. 104To establish a periodically recurring3 yearsWhen the plaintiff right.is first refused the enjoyment of the right. Article 58 provides that the time will begin to run when the "right to sue first accrues". Article 104 provides that time will begin to run when "the plaintiff" is first refused" the enjoyment of the right. On the other hand, Article 137 uses the words when the "right to apply accrues" and is similar to Article 113. A suit, which is filed prior to the order of winding up and pending on the date of winding up, gets stayed when an order of winding up is passed. An order of winding up does not create any right to file an application under Section 446(1) of the Act. Nor does any right accrue to a plaintiff/petitioner in a suit/proceeding to file an application under Section 446(1), when an order of winding up is passed. On the other hand, passing of an order of winding up casts a duty or obligation on the person who has sued the company to obtain the leave to the court to proceed with is suit for proceeding. The right to apply for leave accrues, not because of the order of winding up, but because the suit/ proceeding is stayed. The right to apply for grant of leave under Section 446(1) accrues every moment the suit remains stayed. Consequently, it follows that as long as the suit/ proceeding (filed before the order of winding up) remains stayed, an application for leave can be filed. Therefore, the application filed on 11.8.1995 was in time and not barred by limitation, even if Article 137 is applied. Re: Contention (ii) 20. Learned counsel for the appellant submitted that there was no justification for the court to direct the decretal amount should be recovered from the guarantors first and only if there was any deficit, it should be recovered from the company in liquidation. Learned counsel for the Bank and the Official Liquidator fairly conceded that there was no reason or justification for imposing such a condition, having regard to the legal position that the liability of the principal-debtor and guarantors is joint or several. There is no question of directing the amount to be first recovered from the guarantors. The creditor has the option of recovering the amount in the manner he deems fit. Though the company court has the power while granting leave, to impose conditions, such conditions can be imposed only for good and valid reasons. The terms imposed cannot affect the rights of third parties nor impose an obligation contrary to law. Therefore, the condition imposed while granting leave is deleted. Conclusion 21. In the present case, the suit was against the company as well as its Directors being guarantors in their personal capacity. The suit could have in any case proceeded against the guarantors. It was stayed by the trial court apparently under Section 446(1) even though there was no such prayer to that effect. The only prayer before the Court at the instance of first defendant in the suit for stay of suit under Section 22 of SIC Act which was not granted. The object of appellants in filing an application for stay was to drag on the suit. They have succeeded in their effort to stall the suit for more than 16 years on a virtually non-existent ground. The trial court will, therefore, have to proceed with the suit with all expedition. 22.

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

Explanation:
1[ds]In the present case, the suit was against the company as well as its Directors being guarantors in their personal capacity. The suit could have in any case proceeded against the guarantors. It was stayed by the trial court apparently under Section 446(1) even though there was no such prayer to that effect. The only prayer before the Court at the instance of first defendant in the suit for stay of suit under Section 22 of SIC Act which was not granted. The object of appellants in filing an application for stay was to drag on the suit. They have succeeded in their effort to stall the suit for more than 16 years on a virtually non-existent ground. The trial court will, therefore, have to proceed with the suit with all expedition