Company court stay power is limited: penalty proceedings under sales tax law cannot be halted, but asset recovery may be stayed.

Section 391(6) of the Companies Act, 1956 does not confer an unlimited power to stay all proceedings against a company. The expression "proceeding" does not extend to statutory assessment or penalty proceedings before the sales tax under the Delhi Sales Tax Act, 1975, because that Act is a complete code governing assessment, penalty and interest and the company court cannot restrain the statutory authority from discharging its functions. By contrast, once recovery proceedings are initiated against the company's assets, a stay may be granted because such recovery affects the company's estate and the interests of unsecured creditors.

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Issues: Whether the company court, in proceedings under section 391(6) of the Companies Act, 1956, could stay proceedings for levy of penalty under the Delhi Sales Tax Act, 1975, while permitting recovery proceedings to be stayed.

Analysis: The power under section 391(6) to stay any suit or proceeding against the company is not unlimited and must be read in context. The expression "proceeding" does not extend to statutory proceedings before the Sales Tax Officer for assessment or levy of penalty, because those matters fall within the exclusive jurisdiction of the sales tax authorities under the special statute. The Sales Tax Act is a complete code for assessment, penalty and interest, and the company court cannot restrain the statutory authority from performing duties imposed by that enactment. The position is different once recovery is commenced against the company's assets, because such recovery can affect the estate of the company and the interests of unsecured creditors.

Conclusion: The company court had no jurisdiction to stay penalty proceedings under the Delhi Sales Tax Act, 1975, but recovery proceedings could be stayed.

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