TMI Blog1992 (7) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... s limitation the suit instituted without leave is to be regarded ineffective until leave is granted? Such are the questions we are required to answer in this appeal. Briefly stated, the facts giving rise to the present appeal are as follows: On July 25, 1984, the company was ordered to be wound up and the official liquidator was appointed. On September 18, 1984, the appellants filed a suit, being Summary Suit No. 494 of 1985, in this court for recovery of Rs. 3,30,854 with interest. It is the claim of the appellants in the said suit that defendants Nos. 2 to 5 to the said suit are partners of defendant No. 1, viz., Importex International, and that in or about June/July, 1981, at their request, the appellants sanctioned in favour of the first defendant a bill discounting facility. Several documents were executed in respect of the said facility. Under the said facility, the first defendant discounted five bills drawn on them by Shreeniwas Cotton Mills Ltd. (hereinafter referred to as "the company") which is defendant No. 6 in the said suit, and that the said bills were accepted by the company. In the said suit, the appellants have sued the said firm and its partners and the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing will be deemed instituted on the date of granting leave" and submitted that, thus, on the date on which leave is granted, the suit would be time-barred and, therefore, the learned single judge had rightly not granted the leave in view of the observation of the Supreme Court in the case of Banshidhar Shankarlal [1971] 41 Comp. Cas. 21. In other words, it was submitted that although the Supreme Court in the said decision observed that the leave contemplated was not a condition precedent, the latter observation clearly indicated that it is only on leave being granted that a suit or legal proceeding becomes effective and that too from the date of the granting of such leave. In order to appreciate the rival contentions, it would be advantageous to refer to certain relevant provisions of the Act. These provisions are enacted for achieving the object of the winding up of a company, viz., in the words of Lindley L.J. in Oak Pits Colliery Co., In re [1882] 21 Ch D 322, 329 "to put all unsecured creditors upon an equality and to pay them pari passu ". Thus "when a winding up order is made, the court, acting by its officer the official receiver lays its hand upon the assets and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g up of the company; whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960. (3) Any suit or proceeding by or against the company which is pending in any court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that court. (4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court." Thus, under section 446, no suit or other legal proceeding against the company shall be commenced or if pending at the date of winding up order shall be proceeded with, when a winding up order has been made or the official liquidator has been appointed as provisional liquidator, except by the leave of the court. In short, the effect is that all pending suits and legal proceedings against the company are stayed and no fresh suit or legal pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cution put in force, without leave of the court, against the estate or effects of the company, after the commencement of the winding up; or ( b )any sale held, without leave of the court, of any of the properties or effects of the company after such commencement; shall be void. (2) Nothing in this section applies to any proceedings for the recovery of any tax or impost or any dues payable to the Government." Section 537 contains an unequivocal declaration that any action against the company after the commencement of the winding up, without the leave of the court, "shall be void". Such an express declaration is totally absent in section 446. The legislative intent is, therefore, undoubtedly not to lay, down an absolute prohibition. A decree passed in the absence of leave is not a nullity. (See State of Bihar v. Syed Anisur Rehman [1977] 47 Comp. Cas. 372 (Pat) and United India General Finance Pvt. Ltd., In re: Official Liquidator, United India General Finance Pvt. Ltd. v. Satya Dev Awasthi [1978] 48 Comp. Cas. 190 (Delhi)). Thus, from the clear and unambiguous language of section 446, it can be seen that the leave required is not a condition precedent and can be gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he difference brought about in the language of section 446 of the Act is only a drafting change and has not effected any change in the legal position gathered by the Supreme Court from the language of the corresponding section 171 of the Indian Companies Act, 1913. The change in the language is only by way of amplification, clarification or elaboration of the provision contained in section 171 of the 1913 Act rather than alteration or amendment thereof or departure therefrom. This takes us to the next question, viz., does failure to obtain leave entail dismissal of the suit and whether as regards limitation the suit instituted without leave be regarded ineffective until leave is granted? This is Mr. Kadam's submission which is based on the observation, viz., "the suit or proceeding . . . granting the leave" in Bansidhar Shankarlal [1971] 41 Comp. Cas. 21 (SC). This submission found favour with the learned single judge. The Supreme Court, after unequivocally holding that leave is not a condition precedent, observed as above. This observation has to be read in harmony with what the Supreme Court held a little earlier in the same paragraph, viz., leave is not a condition pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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