Case: Deutsche Bank Vs. S.P. Kala and Another

( 2 ) A few facts relevant for considering the contention raised on behalf of the appellant are that the company under liquidation had borrowed from theseveral amounts of money which, on the date of the application, totalled to Rs. 21,07,251. 57 plus interest of Rs. 11,66,178. 74. The said loans taken by the company under liquidation from thewere guaranteed by Debrata Das, a resident of Bombay and also theof the company. Since the said guarantor was a resident of Bombay, theintended to file a civil suit in Bombay against the company and the said guarantor. The appellant, therefore, filed an application under section 446 of the Companies Act seeking leave of the company court to file a civil suit against the company and the said guarantor in the High Court of Bombay on its original side. The said application is registered as Company Application in Liquidation Proceedings No. 8 of 1989 in Company Petition No.>( 3 ) THE appellant raised a contention before the learned company judge in the said application that, since a third person, viz. , a guarantor, was also a defendant in a suit which the appellant wanted to file against the company, the company court here would not have power and jurisdiction to decide such a suit under section 446 (2) of the Companies Act. He had also urged before the learned company judge that a party of the cause of action had arisen in Bombay and one of the defendants also was a resident of Bombay, and, therefore, such a suit could be filed in the court at Bombay having jurisdiction to try such a suit. The learned company judge negatived both these contentions. He, however, granted leave to the appellant to file a suit before the company court in Goa, i. e. , the learned company judge who is assigned the work at the Panaji bench before whom theproceedings of the instant company under liquidation would also be continued. Feeling aggrieved, the appellant has preferred the instant company appeal against the aforesaid order of the learned company judge declining him leave to file a suit at bombay.

Reasoning: ( 5 ) IT is not necessary for us to consider the larger question whether, in each and every suit where in addition to the company there are other defendants, such a suit can be entertained or disposed of by the company court. In the instant case, it is not in dispute that the company is the principal debtor because it is the company which had taken loan from theThe other defendant against whom relief is sought is a guarantor. When specifically asked, learned counsel for the appellant has made it clear to us that the relief is sought and the decree is claimed both against the company and the guarantor. In such a case where the company is the principle debtor and the decree is claimed in the suit against it, the question is whether such a suit can be entertained or disposed of by the company court. ( 6 ) CONSTRUING section 446 (2) of the Companies Act it may be seen that, in its present form, it was substituted by the Companies (Amendment) Act, 1960, with a view to subserve the object of the winding up of a company. The winding up a company by a court is to facilitate the protection and realisation of its assets with a view to ensure an equitable distribution thereof among those entitled and to prevent the administration from being embarrassed by a general scramble among the creditors and others. Consequently, once the court has taken the assets of a company under its control or has passed an order for its being wound up, it will not be proper to allow proceedings to be started or continued against the company and embarrass the administration of its affairs. The present section is intended to safeguard the assets of a company inagainst wasteful or expensive litigation in regard to matters capable of being determined expeditiously and cheaply by thecourt itself. (9 ) LAYING emphasis upon the expression by or against the company occurring in clauses (a) and (b) of(2) and also in(3) of section 446 of the Companies Act, the submission on behalf of the appellant is that the provisions of(2) and (3) of section 446 are applicable to a suit where either the company is the plaintiff or where the company alone is the defendant since, according to learned counsel appearing for the appellant, there are no words to the effect showing that the suit against the company and other defendants can also be entertained and disposed of by the learned company judge. To test his submission, we invited his attention to the scheme of section 446 (1) of the Companies Act and asked him whether a suit which is filed against the company along with other defendants in the court having jurisdiction to try the same requires leave of the company court for its continuance. Learned Counsel for the appellant does not dispute that leave of the company court is necessary to proceed with such a suit where there are defendants in the suit other than the company under liquidation. In fact, the judgment of the Mysore High Court in G. S. Setty and Sons v. Yellamma Cotton, Woollen and silk Mills Co. [1970] 40 Comp Cas 10 shows that, relying upon the observations in the judgment of the Madras High Court in the case of Purushottam and Co. v. Subhodhaya Publications Ltd. [1955] 25 Comp Cas 49, it has held that when there are defendants in a suit other than the company in liquidation whose rights are affected, leave should be normally granted to proceed with the suit subject to the condition that the decree, if any, obtained should not be enforced against the company under liquidation without leave of the company court. It is clear from the above judgments that the suits where there are defendants other than the company under liquidation are contemplated under section 446 (1) of the Companies Act.( 10 ) IF the suit that is already filed against the company along with other defendants, where particularly the company under liquidation is the principal defendant is under the control of the company court in the sense that, for filing of the suit or when the suit is already filed, for proceeding with it leave of the company court is necessary which can be granted subject to the terms or conditions which it may impose, it is difficult to see why such a suit where there are defendant other than the company under liquidation is not contemplated under(2)and (3) of section 446 of the Companies Act, particular when the company under liquidation is a principal defendant in such a suit and the plaintiff insist upon execution of its decree against the company under liquidation also. In out view, therefore, in appropriate cases, in its discretion, the company court can itself entertain and dispose of a suit in which there are defendants other than the company under liquidation. ( 11 ) IT may be seen that, when, in such a suit, an order or a decree is passed by the company judge against the company under liquidation as well as the other defendants who are parties to the suits, it is open to the company court to pass appropriate orders to enable the plaintiff to execute the decree against the other defendants. It has to be seen that, as provided in section 634 of the Companies Act, any order made by the court under the Companies Act can be enforced in the same manners as a decree made by the court in a suit pending therein. The order or the decree passed by the learned company judge in a suit which he has entertained and disposed of can, as per his discretion, be executed against the other defendants. We do not, therefore, find any force in the submission made on behalf of the appellant that, in a suit where the company under liquidation is the principal defendant in the sense that it is the principal debtor, the suit cannot be entertained and disposed of by the company court only because the guarantor is also an additional defendant in the suit. If such a suit can be entertained and disposed of by the company court, then it has fill powers to pass the decree against the guarantor also which can be enforced against him under section 634 of the Companies Act.is no merit in the above submission because what the learned counsel company judge is deciding is a suit which he has entertained and which he is empowered to entertain under section 446 (2) of the Companies Act. It is a different case when the issue is such which can be exclusively decided by a special court or tribunal constituted for a particular purpose such as a rent court under the Rent Act, etc. The question of liability of a guarantor is a question which any court of general jurisdiction can decide. Moreover, the above judgment is rendered prior to the amendment of section 446 (2) of the Companies Act when, for the first time, the provision was introduced enabling the company court to entertain and dispose of the suit which is by or against the company. The above contention raised or behalf of the appellant must, therefore,of the said cases shows that the learned company judge in the said cases had refused to grant leave to the plaintiffs in the said suits to file the suits in the courts having jurisdiction to try the same. In appeal, reversing the said orders, the above High Courts have held that where the company is a necessary party to the suits and where there are other defendants, courts should generally grant leave to file or to continue such suits subject to the condition that the decree in such suit may not be enforced against such company.