9911796707
TMI Blog1968 (10) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... first respondents from taking any steps or proceedings in execution thereof. In view of the arguments advanced in support of some of the contentions raised on this summons, I propose to set out the facts in greater detail than would have otherwise been necessary. The company was incorporated on August 18, 1967. The main objects for which the company was established are to carry on the business of manufacturers, buyers, sellers and distributing agents of and dealers in all classes of patent, pharmaceutical, medical and medicated preparations, patent medicines, toilet requisites and cosmetics. The registered office of the company is situate at 22, Mahalaxmi Chambers, Bhulabhai Desai Road, Bombay 26. The company also has a godown situate at Hind Rajasthan Estate, 229, Naigaum Cross Road, Bombay. On July 9, 1968, the applicants presented Company Petition No. 87 of 1968 to wind up the company. The applicant's case as set out in the petition is that by an agreement dated December 16, 1967, the applicants were appointed the company's sole selling agents in India for all products of the company upon certain terms. The applicants acted as such sole selling agents but in or about February ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, all of which are of the value of about Rs. 2,00,000. It is further alleged in the petition that the products of the company were being manufactured by the British Drug House Private Limited under an agreement which was terminated in or about May, 1968, and thereafter the production of the company's products has completely stopped. The issued, subscribed and paid-up capital of the company is Rs. 300 out of the authorised capital of Rs. 5,00,000 divided into 5,000 shares of Rs. 100 each. The company had originally three directors, W.F. Young, who was the managing director, Glen C. Macmohan and J. Singh. According to the applicants the said Macmohan left India permanently in or about February, 1968, while the said Singh resigned as director in or about June, 1968, and the said Young suddenly absconded from Bombay some days prior to the filing of the petition and that there is since then no other director or responsible person in effective management and charge of the company's affairs. A copy of the news report which appeared in the 13th June, 1968, issue of the newspaper, Indian Express, Madras edition, about a criminal case registered by the Coimbatore District Crime Branch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er filing the suit, on July 3, 1968, the first respondents applied for an attachment before judgment of the company's movable property, viz., furniture, fittings and stock-in-trade, lying at the company's office premises and the raw materials lying at the company's godown and the goods lying with the said British Drug House Private Lid. and of the moneys lying in the company's bank account with the Bank of America, Bruce Street Branch, Bombay. The said application was supported by an affidavit of one Baji Nariman, the managing director of the first respondents, to which was annexed an affidavit of one Parviz Jal Sonavalla, a representative and bill collector of the first respondents. Both the said affidavits were solemnly affirmed on July 3, 1968. Mr. H. G. Advani, learned counsel for the first respondents, has admitted that the affirmation of the said affidavits was a mistake and instead what was stated in the said affidavits ought to have been on oath inasmuch as the said Nariman and Sonavalla are both Parsi Zorastrians. The said report in the newspaper, Indian Express, a copy of which was annexed to the winding-up petition, was referred to in the said affidavit of Nariman. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ength of these affidavits, on the same dry, viz ., July 3, 1968, two orders of attachment before judgment were made. By each of the said orders the company was ordered to furnish security in the sum of Rs. 25,000 and to place the same at the disposal of the said court in satisfaction of any decree which might be passed against the company or to appear on July 11, 1968, to show cause to the contrary and, in the meantime, by one of the said orders, the Registrar of the said court was ordered to issue a warrant of attachment before judgment under Order XXXVIII, rule 5 and Order XXI, rule 43, of the Code of Civil Procedure, attaching the movable property, viz., furniture, fittings and stock-in-trade belonging to and lying at the company's office premises in its possession and raw materials belonging to and lying at the company's godown in its possession and the goods belonging to and lying in the company's possession at the premises of the said British Drug House Private Limited to the extent of Rs. 25,000. By the other order the said Registrar was ordered to issue a warrant of attachment before judgment under Order XXXVIII, rule 5, an Order XXI, rule 46, of the Code, attaching the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs therein pending the hearing and final disposal of the said summons. On that day the only substantive prayer was for staying the said suit and restraining the first respondents from proceeding or continuing with it or taking any further proceedings in the said suit pending the said winding-up petition. The applicants were apparently unaware of the said attachments before Judgment obtained by the first respondents or of the said decree passed in favour of the first respondents. At the hearing of the summons, on this fact being brought out in the affidavit in reply filed on behalf of the 1st respondents the summons was amended to incorporate a further prayer to restrain the 1st respondents from taking any steps or proceedings in execution of the said decree pending the hearing and final disposal of the said company petition. I will now summarise the rival contentions raised on this summons. The applicant's contentions are that: (a)the orders of attachment before judgment are bad in law ; (b)assuming they are not so, the attachment before judgment does not confer any right upon the 1st respondents ; (c)the attachment confirmed at the time of the passing of the decree being afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction to wind up the company, to restrain further proceedings in the suit or proceedings; and the court to which application is so made may stay or restrain the proceedings accordingly, on such terms as it thinks fit. 446. Suits stayed on winding-up order.-(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 court which is winding up the company shall, notwithstanding anytning contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of- (a)any suit or proceeding by or against the company ; (b)any claim made by or against the company (including claims by or against any of its branches in India); (c)any application made under section 391 by or in respect of the company ; (d)any question of priorities or any other question whatsoever whether of law or fact, which may relate to or arise in the course of the, winding-up of the company ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arain Ramchandra Private Ltd. The said company acting through its directors applied to set aside the said ex parte decree. The contention of the said company was that the ex parte decree was a nullity because the court had no jurisdiction to pass the decree by reason of the appointment of the provisional liquidator since no leave of the court had been obtained to proceed with the suit. A preliminary objection was taken by the plaintiffs that the application was not maintainable as it should have been made by the provisional liquidator. This objection was upheld by the learned judge who held that: "The only person competent to make an application after there has been appointment of the provisional liquidator is such person and not the company". Relying upon this passage Mr. Advani has submitted that the judge's summons ought to have been taken out by the provisional liquidator and that too in his own name and not by the applicants. This argument of Mr. Advani overlooks the provisions of section 442 of the Companies Act, for that section expressly confers upon a contributory and the company as also upon a creditor the right to apply for stay of a pending suit or proceeding at any t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omp. Cas. 191 (PC)), their Lordships of the Privy Council pointed out that the change which liquidation proceedings bring about in regard to a suit against a company is that in the conduct of its defence the company would, before liquidation, act through the directors and during liquidation through the liquidator. When a company is ordered to be wound up or a provisional liquidator appointed, any legal proceeding by a company, therefore, has to be instituted, by the official liquidator or the provisional liquidator, as the case may be, but in the name and on behalf of the company and the directors will have no right to institute such legal proceeding since the company no more acts through its directors, and when the learned judge held that the only person competent to make the application was the provisional liquidator and not the company, he really meant no more than this. There is, therefore, no substance in the objection taken by the first respondents to the applicants' locus standi to take out the judge's summons. At the outset the applicants have submitted that none of the interesting questions with respect to the scope and effect of section 537(1) of the Companies Act raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard. Sub-rule (3) of Order XXXVIII, rule 5, provides that the court may also in the order direct the conditional attachment of the whole or any portion of the property specified. The order referred to in this sub-rule is the order directing the defendant to furnish security or to appear and show cause why security should not be furnished. This is further borne out by the use of the word "conditional" in Order XXXVIII, rule 5(3). Under that sub-rule, the order of attachment is conditional, because the attachment ordered to be made would be ordered to be withdrawn under Order XXXVIII, rule 6(2), when either the defendant shows cause or furnishes the required security. It is in the discretion of the court, depending upon the facts of each case, whether at the time of issuing the notice and directing the defendant to furnish security or to appear and show cause why the security should not be furnished, a conditional attachment of the property should be directed or not. If no conditional attachment has been directed, the court will proceed under Order XXXVIII, rule 6(1), and if the defendant fails to show cause or fails to furnish the required security within the specified time, the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company, after the commencement of the winding-up. In the present case, if the company were ordered to be wound up under section 441(2), the winding-up would be deemed to commence on the presentation of the winding-up petition, viz., on July 9, 1368. In Mr. Advani's submission the attachment before judgment levied by the first respondents was prior to that date and hence not hit by clause (a) of section 537(1) and accordingly the first respondents were entitled to proceed with and complete the attachment or execution put in force" any them without obtaining leave of the court; for, according to Mr. Advani, if no leave of the court was necessary even after the company was ordered to be wound up, no purpose could be served by staying further proceedings in execution of the decree obtained by the first respondents pending the hearing of the winding-up petition. While considering the arguments on this part of the case I will omit the word " distress "when referring to the expression" attachment, distress or execution put in force " except when necessary for the consideration of the question before me. The question which first falls for consideration is whether an attachment bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cree which may he passed in the suit to be attached. Where the defendant shows such cause or furnishes the required security, and the property specified or any portion of it has been attached conditionally by the court, the court may order the attachment to be withdrawn, or make such other order as it thinks fit. Rule 7 provides that "save as otherwise expressly provided, the attachment shall be made in the manner provided for the attachment of property in execution of a decree". Rule 8 provides for investigation of claim to property attached before judgment and provides that such claim should be investigated in the same manner as provided for the investigation of claims to property attached in execution of a decree for the payment of money, i.e., in the manner provided by Order XXI, rules 58 to 63. Order XXXVIII, rule 9, provides that an attachment before judgment is to be ordered by the court to be withdrawn when the defendant furnishes the required security or when the suit is dismissed. Under Order XXI, rule 55, on the other hand, the attachment in execution of a decree is to be removed after the decree is satisfied or is set aside or reversed. Under Order XXXVIII, rule 10, att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is only in certain procedural respects that the provisions of Order XXI relating to attachment are made applicable to attachment before judgment. This brings me to the difficult question of what happens to an attachment before judgment when a decree is passed in favour of the plaintiff. The only provision of the Code dealing with this situation is rule 11 of Order XXXVIII which provides that: "Where property is under attachment by virtue of the provisions of this order and a decree is subsequently passed in favour of the plaintiff, it shall not be necessary upon an application for execution of such decree to apply for a re-attachment of the property". Mr. Advani, learned counsel for the first respondent, has submitted that the combined effect of rules 7 and 11 of Order XXXVIII is that on a decree being passed in favour of the plaintiff, the attachment before judgment becomes an attachment in execution with retrospective effect from the date the attachment was levied or in any event from the date of the decree and therefore the attachment or execution is put in force within the meaning of section 537(1)(a) of the Companies Act from the date the attachment before judgment was l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder XXI, rule 11(2), provides that an application for execution of a decree is to be in writing signed and verified, and prescribes the particulars to be set out therein. Amongst the particulars required to be specified are the date of the decree, whether any appeal has been preferred from the decree, whether any, and, if so, what payment or other adjustment of the matter in controversy has been made between the parties subsequent to the decree and what previous applications for execution of the decree have been made and their results as also in which of the modes specified in section 51 the assistance of the court is required. Under rule 146 of the Rules of the Bombay City Civil Court, 1948, all applications for execution of decrees or orders are to be made to the Registrar of that court and the transmission of decrees and the issue of all necessary warrants and notices are to be made by him. Rule 154 requires every application for execution to be in Form No. 38 and to contain in addition to the particulars mentioned in Order XXI, rule 11(2), also the date and nature of any writ issued before or after the judgment. Under rule 166 when a warrant for sale is not taken out within a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly, was entitled to rank as an applicant in execution against the property attached so as to become entitled to rateable distribution without applying for execution. The provisions for rateable distribution under the old Code were to be found in section 295 and were materially the same as those in section 73 of the present Code. The provision corresponding to the present Order XXXVIII, rule 11, was section 490 which provided that where property is under attachment by virtue of the provisions of this Chapter, and a decree is given in favour of the plaintiff, it shall not be necessary to re-attach the property in execution of such decree. The argument by the decree-holders who had obtained an attachment before judgment was that by reason of the provisions of section 490, no application for attachment was necessary as on the passing of the decree the attachment before judgment became an attachment in execution. After examining the provisions of the old Code relating to execution, Scott J. held that the effect of section 490 was that the attachment before judgment enures and became an attachment in execution. Scott J. further came to the conclusion, though somewhat reluctantly as he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property was to be considered as attached in execution by virtue of Order XXXVIII, rule 11, and a claim put in after such an order might properly be regarded as a claim to property attached in execution of a decree within the meaning of article 11. Spencer J., who gave a separate but concurring judgment, held that once a decree was passed and an attempt made to execute it, what was an attachment before judgment became in effect an attachment in execution of a decree by reason of Order XXXVIII, rule 11, and as attachment is the first step in the execution of all decrees against property, just as sale or delivery of property is the las step, the effect of Order XXXVIII, rule 11, was that execution is made to date back to the first attachment which was before judgment. The question again came up for consideration before another Full Bench of the Madras High Court in Meyyappa Chettiar v. Chidambaram Chettiar. [1924] ILR 47 Mad. 483 (FB). The question referred to the Full Bench was whether Order XXI, rule 57, applies to property attached before judgment, when there has been a decree followed by an execution petition for the purpose of bringing the attached property to sale. Under O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as this High Court is concerned, in two cases under the present Code, viz., Ardeshir Nusserwanji Dossabhoy v. Usman Gani Memon [1929] 31 Bom. LR 1101 ; AIR 1929 Bom, 455 and Hari Sabaji Kamat v. Shrinivas Vithal Pal [1931] 33 Bom. LR 1130; AIR 1931 Bom. 550, the majority view in the Full Bench case of Meyyappa Chettiar v. Chidambaram Chettiar [1924] ILR 47 Mad. 483 (FB) was adopted. The first was the decision of Madgavkar J., sitting singly, while the second was the decision of a Division Bench. The same question, viz., whether Order 21, rule 57, applied to an attachment before judgment came up for consideration before another Division Bench of this High Court in Dattatraya Baliram Naik v. Rambhabai Jairam Patil [1962] 64 Bom. LR 280 and the Division Bench, after considering the earlier authorities, held that Order XXI, rule 57, did not come into operation in the case of an attachment before judgment and an attachment before judgment was, therefore, not vacated merely because the application by the decree-holder for the execution of the decree was dismissed owing to some default made by him. The court pointed out that in cares where an attachment before judgment had been made it co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being attached again in execution for the purpose of executing the decree. Accordingly, the question of any attachment within the meaning of clause (a) of section 537(1) being put in force against the property of the company does not and will not arise in this case. In view of some doubt that prevails as to when an attachment, distress or execution can be said to be put in force, as I will point out late r, I do not propose to decide at what precise stage hereafter the execution will be put in force as it is not necessary for the purposes of the present application to do so, but at whatever stage it is put in force, it will be after the commencement of the winding up and hence would be void unless leave of the court dealing with the winding-up petition is obtained. I may at this stage deal with another contention of the applicants, viz., that if the company were ordered to be wound up, the attachment before judgment would become void on the date when the decree was passed, because it would be then an attachment or execution put in force without leave of the court. I have already held that on the decree being passed, the attachment before judgment does not become an attachment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on put in force without leave of the court against the estate or effects or any sale held without leave of the court of any of the properties of the company after the commencement of the winding up shall be void. (2) Nothing in this section applies to proceedings by the Government". As originally enacted, section 232 did not contain the words "or any sale held without leave of the court of any of the properties". In Kayasth Trading and Banking Corporation's case (supra ) the facts were that, long prior to the presentation of the winding up petition against the company, certain property belonging to the company was attached in execution of a decree. The property was repeatedly put up for sale. It was last put up for sale on the very day on which the winding-up proceedings were initiated. On that day too there were no bidders prepared to offer up to the reserved price and the court passed an order allowing fourteen day's time to the decree-holder to make any further application. Before the expiry of that period, an offer for purchase of the property was received from the special manager of the court of wards and after fixing another date for the auction sale, at which sale no other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and issued a writ of fieri facias which was duly executed by the Sheriff by seizure. Thereafter a petition was presented for winding up the company and an ex parte order was made to restrain the sale by the Sheriff of the property seized. On appeal, it was held that this was not a case where a stay ought to be granted seeing that the creditor had obtained his judgment after great opposition, execution issued upon that judgment, property seized under the execution, and nothing to stop it, except the power given to the court under the Companies Act, 1862. Knight Bruce L.J. did not express himself upon the point but according to Turner L.J., as the winding up petition was presented some days after the seizure by the Sheriff, execution had been put in force before the petition was presented. There is, however, no discussion on the meaning of the expression "attachment, execution or distress put in force". I take it that there are other English authorities to this effect, hut in considering how far English authorities on the subject can apply, the different modes of execution which prevail in England and in India ought not to be lost sight of. It should also be borne in mind that in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agwati J. pointed out that in Baldeo Narain Singh v. United India Bank Ltd. AIR 1916 Pat. 47, a contrary decision was reached by the Patna High Court in circumstances exactly similar to those before the Allahabad High Court and that this conflict was resolved and the decision of the Allahabad High Court got over by amending section 232. This, on the contrary, shows that the legislature did not act with the intention of introducing a new provision in the Companies Act, but, as the legislature preferred and approved the Patna view, it wanted the law to be brought in line with it so as to make express its original intention in enacting section 232. The exact scope and effect of section 537 of the Companies Act, 1956, can only be judged by bearing in mind that just as sections 169, 171 and 232 of the old Companies Act, 1913, were supplementary to one another, so under the Companies Act, 1956, sections 442, 446 and 537 of the present Act are supplementary to one another. The scheme underlying this group of sections is a part of the general scheme of administration of the assets of a company in liquidation laid down by the Companies Act. This scheme is that all creditors, other than sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecution proceedings against the company pending at the date of the winding-up order. Section 537 lays down the consequences of adopting certain specified proceedings against the property or effects of the company without leave of the court after the commencement of the winding up and in terms makes such proceedings void. From this, however, the converse that if a proceeding had started, prior to the commencement of the winding up, it can continue without Lave of the court does not follow. The consequence of non-compliance with section 446 is not to be found only in section 537. While section 446 deals generally with all suits and proceedings, section 537 deals with certain specified types of proceedings only. Accordingly, if the execution proceedings were pending at the date of the winding-up order, by reason of the express provisions of section 446, the first respondents would not be able to proceed with them unless they obtained leave of the court. In B. V. John v. Coir Yarn and Textiles Ltd. [1960] 30 Comp. Cas. 162 the Kerala High Court rejected the argument that the consequences of not obtaining leave under section 446 were to be found only in section 537(1) and, consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, and that what was prohibited by that section was the process of attachment against the estate or effects of the company without leave of that court. If, therefore, the execution had already been put in force against the estate or effects of the company, when no leave of the court was necessary as contemplated under section 232, then that execution was free to proceed to its logical conclusion without being hit by that section notwithstanding the fact that thereafter there was actually a commencement of the winding up. The court derived support for the conclusion it had reached from the amendment made in section 232 in 1936. The following passage in the judgment in that case has been relied upon by Mr. Advani : "Otherwise on rational ground it would be difficult to support the view that in the same execution which has been put in force after the commencement of the winding up leave of the court should be sought twice, first, at the stage when the attachment is effected and then again in the same proceeding at the stage when the sale of the property attached is held. And if the new sub-clause ' or any sale held without leave of the court of any of the properties ' is to refer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government of Madras [1955] 25 Comp. Cas. 344; AIR 1955 S.C. 604, where the circumstances which led to section 232 being amended, and the evil which was sought to be remedied thereby were pointed out, viz., to get over the judgment of the Allahabad High Court and the complications that followed as a result thereof. That is a quite different thing from the legislature accepting that judgment as correctly interpreting the unamended section 232. But even according to the Patna. decision, a sale held after the commencement of the winding up of property of the company attached before the commencement of the winding up, though not void under the unamended section 232, would still have been voidable at the instance of the liquidator under section 171. Mr. Advani has also relied upon a judgment of a Division Bench of the Calcutta High Court in Amrit Lal Kundu v. Anukul Chandra Das [1916] ILE 43 Cal. 586. In that case the company's properties were attached and were about to be put to sale when the shareholders passed a resolution for voluntary winding up, appointing the petitioner sole liquidator. The liquidator thereupon sought to stay the sale proceedings and to release the movables from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a proceeding against the company, no leave would be required for adopting garnishee proceedings against the bank. Neither of these contentions can be accepted. Execution is either against the person or the property of the judgment-debtor. The moneys in the company's bank account have been attached because they are moneys belonging to the company, and it is because they are moneys belonging to the company that the bank will be called upon by a garnishee notice to deposit them in court in satisfaction of the decree obtained by the first respondents against the company. If these were moneys belonging to the bank, the first respondents would have no right to proceed against them in execution of a decree obtained against the company. Garnishee proceedings are also proceedings in execution against the property of the judgment-debtor (see Anglo-Baltic and Mediterranean Bank v. Barber and Co. [1924] 2 KB 410, 418). According to Mr. Advani, learned counsel for the first respondents, the position originally prevailing has been changed by the insertion of rules 46A to 46G in Order XXI, with effect from November 1, 1966, by the High Court in exercise of the powers conferred upon it by sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y with the terms of such notice, and on such order execution may issue as though such order were a decree against him". Rules 46C to 46E deal with a case where a garnishee disputes his liability or it appears to the court that the debt belongs to some third person or that any third person has a lien or charge or any other interest over such debt and for the determination of the question that would then arise. Rules 46F, 46G and 46H are as follows : "46F. Payment by garnishee under orders of court to be valid discharge to the garnishee.-Payment made by the garnishee on a notice under rule 46A or under any such order as aforesaid shall be valid discharge to him as against the judgment-debtor or any other person ordered to appear as aforesaid for the amount paid or levied, although such judgment may be set aside or reversed. 46G. Costs.-The costs of any application made under rule 46A and of any proceeding arising therefrom or incidental thereto shall be in the discretion of the court. 46H. Appeal.-An order made under rule 46B, 46C or 46E shall be appealable as a decree". Rule 46G would also show that garnishee proceedings are proceedings in execution initiated by an application, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only against the garnishee and not against the company. That decision lays down no such proposition as canvassed by Mr. Advani. In the Civil Procedure Code as applicable in the State of Kerala rules 46A to 46-I have been inserted in Order XXI. These Rules are similar to rules 46A to 46H inserted in Order XXI by our High Court. In the case before the Kerala High Court a garnishee notice was issued and was made absolute and an order was made under Order XXI, rule 46B, against the garnishee to deposit the amount in court and a warrant was directed to issue to the garnishee. A petition to wind up the judgment-debtor company was presented. After the presentation of the petition, the garnishee made an application for exemption from personal execution and while this application was pending, the judgment-debtor bank was ordered to be wound up. Thereupon the garnishee applied for stay of proceedings under section 446. The court expressed great doubt as to whether the garnishee had any locus standi to apply under section 446. The court held on the merits that under Order XXI, rule 46B, once a garnishee order was made against a garnishee, it became in effect a decree against the garnishee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, withdrawn at the instance of the judgment-creditor who thereafter filed a fresh application for execution by sale of the property without attachment and a warrant of sale under Order XXI, rule 64, was issued. The official assignee thereupon took out a chamber summons to quash and set aside that warrant and for an order directing the Sheriff to hand over possession of the property to him on the ground that it had vested in him under section 52(2)(c) of the Presidency Towns Insolvency Act. Under the relevant provisions of that Act, the property of the insolvent vests in the official assignee and becomes divisible amongst his creditors. Under section 52(2)(c) the property of the insolvent includes goods which at the commencement of the insolvency were in the possession, order or disposition of the insolvent in his trade or business by the consent and permission of the true owner under such circumstances that he is the reputed owner thereof. The court held that by reason of the attachment the stock-in-trade belonging to the judgment-debtor had ceased to be in his possession, order or disposition and, therefore, was not available to the official assignee under section 52(2)(c) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult then of the whole case, in my opinion, is that even if the applicant fails to establish his claim to be a secured creditor-which technically he seems not to be-and if his real position was only that of an attaching creditor, yet he has apparently lost that position by reason of the events that have happened. There is, at present, no application before the court to allow him to proceed with his rights in execution as an attaching creditor, if any. Under those circumstances his present application to be treated as a secured creditor in respect of this engine and to be paid out of the proceeds of the engine in priority to the other creditors, is misconceived, and must be dismissed". On the strength of this passage Mr. Advani has submitted that the court considered that the applicant would have been a secured creditor but for the fact that he had lost that position by reason of the events that had happened. The passage, however, does not bear the construction sought to be placed upon it by Mr. Advani. It, on the contrary, clearly points out that the applicant had failed to establish his claim that he was a secured creditor by reason of the attachment levied by him. It further poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition, execution issued upon that judgment and property seized under the execution before the presentation of the winding-up petition, if an application for stay had been made, the court would have refused the stay. I have already held that in the present case execution has not been put in force. The decision in Ex parte Tarry : In re Great Ship Company Ltd [1863] 33 LJ Ch. 245 has, therefore, no application to the present case. Apart from this, since the date of the decision in Ex parte Parry : In re Great Ship Company Ltd [1863] 33 LJ Ch. 245 the trend of later English authorities has been to the contrary. These later authorities have laid down that in the balance of special circumstances and until the execution is completed by seizure and sale, the court ought to exercise the discretion vested in it by staying or restraining the proceedings with a view to securing equal distribution of the assets among creditors of the same class, as otherwise during the interval between the presentation of a winding-up petition and the making of a winding-up order, certain creditors would help themselves out of the assets of the company in priority to some others in a less fortunate position ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the attachment to prevail over the interest of the creditors as a whole. The third circumstance relied upon by Mr. Advani is the change made in the language of section 446 from that used in the corresponding section 171 of the old Companies Act of 1913. Under the old section 171 leave of the court was necessary both for commencing as well as proceeding with a suit or other legal proceeding against the company when a provisional liquidator was appointed. Now under section 446 when the official liquidator is appointed as provisional liquidator, leave is necessary only for commencing a suit or other legal proceeding and not for proceeding with it. According to Mr. Advani, since the attachment or execution was put in force against the property of the company before the presentation of the winding-up petition, any step which the first respondents may now take would not be commencing a legal proceeding but would be proceeding with a legal proceeding for which they are not required to obtain leave of the court. If no leave of the court is necessary, then, in Mr. Advani's submission, no stay ought to be granted. I have already negatived the contention that the attachment or execution has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The decree obtained by the first respondents is an ex parte decree. The company could not even file an appearance as there was nobody in charge of the company. From this I should not be understood to say that I doubt in any way the genuineness of the first respondents' claim. This is a matter for the official liquidator to look into, if the company is ordered to be wound up, at the stage of proof of debts. In these circumstances, the applicants are entitled to the relief which they seek and I, accordingly, pending the hearing and final disposal of Company Petition No. 87 of 1968 filed by the applicants to wind up the company, stay all proceedings in execution of the decree passed on July 18, 1968, in favour of the first respondents against the company by the Bombay City Civil Court in Suit No. 4234 of 1968 and also during this period restrain the first respondents from taking any step or proceedings in execution of the said decree. The hearing of this summons has taken nearly 20 hours. Such elaborate arguments became necessary by reason of the contentions raised by the first respondents, each one of which has been negatived. In these circumstances, this is a fit case for the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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