Section 446 stay cannot block recovery suits against non-company defendants merely because the transaction involved liquidation

Section 446 of the Companies Act, 1956 does not justify staying a recovery suit against non-company defendants merely because the goods were allegedly supplied to a company under liquidation. Liability of the defendants was a matter for trial, and the threshold request for stay could not be sustained on that basis; if they were ultimately found not liable, the suit could still fail on merits. The liquidation leave requirement applies only to proceedings against the company or proceedings otherwise requiring leave in the context of liquidation, not to a suit against third parties linked to the transaction.

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Issues: Whether a suit for recovery against the defendants could be stayed for want of leave under section 446 of the Companies Act, 1956 on the footing that the goods were supplied to a company under liquidation.

Analysis: The suit was not treated as a suit against the company merely because the goods were allegedly supplied to it. The question whether the defendants were in fact liable for the amount was held to be a matter for trial and not a ground for invoking section 446 of the Companies Act, 1956 at the threshold. If the defendants were ultimately found not liable, the suit could be dismissed on merits, but that did not justify staying the proceedings under the liquidation provision.

Conclusion: The request to stay the suit under section 446 of the Companies Act, 1956 was rejected and the order dismissing the application was upheld against the petitioner.

Ratio Decidendi: Section 446 of the Companies Act, 1956 applies only to proceedings against the company or proceedings requiring leave in the context of the company's liquidation, and it cannot be used to stay a suit against non-company defendants merely because the underlying transaction is said to involve the company.

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