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of <h1>Court allows post facto permission for legal action against company in liquidation under Companies Act</h1> <h3>United Commercial Bank Versus State of Jammu & Kashmir</h3> United Commercial Bank Versus State of Jammu & Kashmir - [1986] 60 COMP. CAS. 653 (PUNJ. & HAR.) Issues:1. Whether post facto permission can be granted and be effective for the continuation of a suit instituted prior to obtaining permission under section 446 of the Companies Act, 1956.Analysis:The judgment pertains to a case where a suit was filed against a company in voluntary liquidation without obtaining prior leave as required under section 446 of the Companies Act, 1956. The court addressed the issue of whether post facto permission could validate the suit filed before obtaining leave. The court referred to conflicting views from different High Courts and the Supreme Court's ruling in Bansidhar Shankarlal v. Mohd. Ibrahim [1971] 41 Comp. Cas. 21. The court noted that the provision under the Companies Act, 1956, is similar to the one in the Companies Act, 1913, and emphasized the importance of obtaining court permission to proceed with legal proceedings against a company in liquidation.The court discussed the interpretation of section 446(1) of the Companies Act, 1956, which mandates obtaining court leave to commence or continue legal proceedings against a company in liquidation. The court compared the provisions of section 171 of the Companies Act, 1913, with section 446 of the present Act to analyze any changes in the law. The court highlighted that the addition of certain words in the later provision did not alter the fundamental requirement of obtaining court leave before initiating or continuing legal proceedings against a company in liquidation.The judgment further examined the divergent views of different High Courts on the issue of post facto permission for suits against companies in liquidation. The court referenced judgments from the Bombay, Gujarat, and Madras High Courts to elucidate the varying interpretations of the law. Ultimately, the court concurred with the interpretation laid down by the Supreme Court in Bansidhar Shankarlal's case, emphasizing that obtaining court leave is not a condition precedent for instituting a suit against a company in liquidation. The court held that once leave is granted, the legal proceeding would be deemed valid from the date of obtaining such permission. Consequently, the court ruled that the suit in question could proceed after obtaining post facto sanction, and scheduled the case for further trial before the single judge.
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