TMI Blog1969 (4) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... 446 of the Act to prosecute and continue O.S. No. 30 of 1967, on the file of the Court of the Subordinate Judge, Adoni, Kurnool District, Andhra Pradesh, in which the respondents are the defendants. The matter arises in this way : The appellant, a firm of merchants dealing in yarn with the place of business in Adoni, had dealings with the Yellamma Cotton, Woollen Silk Mills Co. Ltd., Davanagere. They were advancing money to the company towards or on account of yarn to be supplied to them. As a result of the said transactions, the company is said to have become indebted to the appellant in a sum of about Rs. 18,000. The 2nd respondent before us, the managing director of the company, guaranteed the payment of the said amount. After exchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stayed under section 446. Then the appellant filed Company Application No. 154 of 1968 under section 446 before the learned company judge for leave to proceed with O.S. No. 30 of 1967. In the affidavit filed in support of the application it was stated that the plaintiff has claimed a decree against the 2nd defendant for the suit amount on the basis of his guarantee and the suit against the said defendant cannot be proceeded with in the absence of the company in liquidation and therefore leave should be granted to proceed with the suit in the interests of justice. The official liquidator filed a counter-affidavit opposing the application on the ground, inter alia , that the applicant having submitted the suit claim in the liquidation pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess should be suspended ; otherwise, the winding-up would resolve itself into a scramble for the assets. Section 442 gives the court jurisdiction after presentation of a winding-up petition and before a winding-up order has been made to stay or restrain the proceedings against the company, and by section 446, on a winding-up order being made, proceedings are automatically stayed and cannot be proceeded with without leave of the court. In this way, creditors and others are compelled to come in and prove their claims in the winding-up, and a rateable and just distribution of the company's assets is effected. Section 446 of the Act corresponds to section 1 71 of the Indian Companies Act, 1913. There are similar provisions in the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d another person, subsequently to which an order for winding up the company was made, and Stuart V.C. having refused the plaintiff leave to proceed with the suit, the Court of Appeal in the Chancery discharged Stuart V.C.'s order, being of opinion that section 87 of the Companies Act, 1862, was not intended to prevent the prosecution of such a suit to which the company in liquidation was a necessary party. The report of the said decision reads : "Lord Justice Turner said that it could never have been the intention of the Act to prevent the prosecution against third parties of suits to which a company in liquidation was a necessary defendant. He thought, however, that it would be right that the plaintiff should give an undertaking not to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned company judge has refused leave to proceed with the suit on two grounds, viz .: (1)leave under section 446 being necessary only to proceed against the company, as the applicant has filed a claim for the suit amount with an affidavit of proof in the winding-up proceedings, there is no need for him to proceed with the suit for the purpose of recovering the money from the company; and (2)the only purpose of the applicant in continuing the suit being to secure a personal decree against the managing director (respondent No. 2) as the guarantor which cannot be got from out of the funds of the company, the power under section 446 cannot be rightly exercised for assisting such a result. We have referred to the counter-affidavit o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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